Navigating a Tariff World

As of April 2025, the United States (U.S.) has introduced significant tariffs and port fees targeting Chinese owned and Chinese operated vessels as well as Chinese-built vessels entering U.S. ports. The initial proposal took place in February 2025 and it was finalized in April 2025. This was followed by a 180-day grace period. During this pause fees are set to US$ 0 from around April until 14 October 2025 to allow operators time to adjust or place orders for U.S.-built equivalents.

These measures mainly aim to counter China's dominance in global shipbuilding and maritime logistics, bolster U.S. national security and revitalize the US domestic shipbuilding industry.

Apart from the above mentioned Chinese targeted tariffs, there are also other provisions with tariffs applying to all foreign built vessels, such as vehicle carriers and LNG carriers which are all set out in four different annexes (annex I – IV). In particular, the four annexes introduce tariffs applicable to Chinese operators and owners, Chinese-built vessels, foreign-built vehicle carriers and LNG carriers.

Members should carefully review the provisions if they suspect they may fall into any of these categories. Special attention should be given to Annex II, as Members could easily find themselves affected by it, especially if they manage mixed fleets or they have purchased vessels on the second-hand market, given China’s dominant position in the shipbuilding sector.

Key Details of the Tariffs

The tariffs are scheduled to commence at the end of the grace period on 14 October 2025 with a phased increase over three years.

Moving on to the fee structure, as mentioned there are four annexes:

Annex I

Annex I applies to vessels that are operated or owned by Chinese entities (including Hong Kong and Macau) irrespectively of the size or volume of the vessels.

Ownership and operation are determined by the entities listed on the Vessel Entrance or Clearance Statement (Form 1300) filed with U.S. Customs and Border Protection (CBP). A vessel will be considered Chinese owned or operated if the listed owner or operator falls within the various listed control and ownership criteria (e.g. they are headquartered in China, Hong Kong or Macau, controlled by a Chinese citizen or resident, organised under Chinese law, et al. It is expected that ship managers may be classified as operators for the purposes of the annex.

In contrast, the definition of "owner" is anticipated to be more straightforward, likely referring to the holder of the vessel's legal title. The term "Chinese entity" is expected to have a broader scope, potentially including entities headquartered in China, controlled by Chinese citizens, or subject to Chinese jurisdiction.

As annex I refers to both Chinese-operated and Chinese-owned vessels, we expect that it also includes those vessels under charter or leasing.

Annex II

Annex II covers vessels built in China, regardless of ownership and applies only if annexes I, III and, IV do not already apply.

The fee starts from US$ 18/NT from 14 October 2025, rising to US$ 33/NT by 17 April 2028 (based on net tonnage) or US$ 120/container, rising to US$ 250/container by 17 April 2028 based on the number of containers discharged. Again, as with annex I, there is a cap, and the vessel will be charged per rotation for multiple U.S. port calls with a maximum of five charges per year. It is worth mentioning that annex II provides for exemptions for empty vessels or those in ballast voyages, for smaller vessels, for vessels owned by plus 75% by US controlled entities and for special purpose vessels. Finally, there is a window for suspension of the fees, if the Owner adds a US built vessel to their fleet.

Annex III

Annex III targets non-U.S.-built vehicle carriers, marking a shift from the China-focused rationale of annexes I and II. Under this provision, operators are required to pay a fee of US$ 150 per Car Equivalent Unit (CEU) based on the vessel's capacity. However, an exemption may be granted for a period of three years if the operator adds a U.S.-built vehicle carrier to their fleet.

Annex IV

Finally, Annex IV is set out more as an export regulation than a fee provision and pertains to the licensing of vessels for LNG exports. Similar to annexes II and III, there is a potential three-year exemption if a U.S.-built LNG carrier is added to the fleet.

The application of Annex IV will begin no earlier than 17 April 2028, at which point 1% of LNG exports must be transported on U.S.-flagged and operated vessels. Starting 17 April 2029, this requirement will expand to include U.S.-flagged, operated and built vessels gradually increasing to 15% by 2047.

 

Market Effects

The newly announced tariffs are part of a broader initiative aimed at reducing U.S. reliance on Chinese maritime infrastructure, enhancing economic security, and revitalizing domestic shipbuilding. As part of these efforts, the U.S. plans to increase the percentage of exports transported on U.S.-flagged and U.S.-built vessels over the next seven years.

The market is closely monitoring the potential impact on the shipping sector, which remains deeply intertwined with Chinese shipyards. To illustrate China’s dominance in the shipbuilding industry:

• 69.7% of all bulk carriers and 71.7% of all tankers currently on order globally are being constructed in Chinese shipyards.
• Historically, Chinese shipyards have delivered 44.4% of all bulk carriers and 23% of all tankers worldwide.

Given these figures, the implementation of the tariffs is expected to create significant disruption across the maritime market, further compounding the volatility experienced in recent years due to various financial and geopolitical factors.

The maritime industry has voiced concerns that the tariffs could disrupt global shipping routes, elevate freight costs, and strain supply chains. Industry leaders warn of potential port congestion, reduced port calls, and challenges for exporters, particularly those shipping perishable goods.

Additionally, charterers may increasingly seek to avoid Chinese-built vessels, altering fleet dynamics. The value of second-hand Chinese-built vessels is expected to decline, while owners may shift future newbuilding orders to other shipbuilding nations, such as South Korea.

Charterparty Effects Under English Law

Whilst it is too early to predict the nature of disputes that might arise, there are various points to consider for contracts under English law. The vessel operator will most likely be the party with the onus calculated and pay fees to the US authorities.

Parties may choose to reallocate liability through contractual terms. However, this will depend on both the nature of the fee and the specific wording of those terms. While these charges are referred to as “tariffs” and may even be described by some as “sanctions” due to their political motivation and embargo-like effect, they are most likely to be interpreted as a form of tax under standard charterparty clauses. If that interpretation holds, Members should carefully examine their contracts and seek legal advice to determine where liability for these tariffs lies.

Assuming the tariffs are treated as taxes or tax-like fees, liability would typically rest with the charterers under a Time Charterparty (for example, under the NYPE 93 form, charterers are responsible for taxes and dues. The SHELLTIME 4 and BPTime 4 places commercial operation costs and cargo-related dues on the charterers, while vessel ownership and income-related taxes remain with the owners).

Under a Voyage Charterparty, liability would likely fall to the owners (for instance, under the Gencon 94, owners are liable for taxes on the vessel, while charterers are responsible for taxes on the cargo. Similarly, under the Asbatankvoy form, owners remain liable for existing dues). Under a Bareboat Charterparty, liability will usually fall to the bareboat charterers.

Due to the significant impact of these tariffs, the market has identified the need for a standard clause allocating the cost, risk and responsibility for payment of the fees. INTERTANKO has already produced a standard clause for period time charters in this respect. We understand that BIMCO is also considering producing a clause for time and voyage charters to address the recent measures and tariffs imposed by USTR.

Effects on Shipbuilding Contracts

As China is dominant in shipbuilding, we expect disputes to arise if vessel owners attempt to cancel existing contracts. Although not tested yet, as matters stands, it is not expected for the issue to fall within the sanctions or force majeure clauses of shipbuilding contracts. Such as the fact that if the cost of the operation of a vessel is higher than expected on certain voyages, it will not be a valid ground for the buyer to escape from a contract.

Whilst it appears that owners and charterers’ have limited space to navigate within clauses of English Law governed contracts, it remains to be seen what the commercial and geopolitical effects will be, while they will be trying to practically navigate in a tariff world.