Proposed Us Tariffs: ‘Service Fees’ On Vessels Calling At Us Ports

in Shipping Law News

11/03/2025

On Friday 21 February 2025, the US Trade Representative (USTR) announced proposals to impose substantial ‘service fees’ on ships and ‘operators’ with Chinese connections, be that Chinese ownership or the vessels having been built in Chinese yards.

The proposal is open to public commentary in the US until a hearing scheduled for 24 March 2025, at which point the President will take a decision on whether the proposed fees are to be imposed.

The genesis for the proposals is said to be the USTR’s determination that China is involved in unfair trade practices in the maritime and shipbuilding sectors. The Chinese government has drawn attention to the opposition to the proposals raised by a number of WTO members.

The proposals

The proposals are broadly as follows:

As the proposed service fees are for each US port call, a vessel calling at multiple US ports on a liner trade or as part of a loop would incur multiple such fees per voyage.

The terms ‘service fees’ and ‘operators’ are not defined in the proposal. For service fees, questions arise as to whether these are effectively ‘port charges’ or taxes or dues on the vessel.  It is also not known which authority would take responsibility to levy and collect the fees.

As to ‘operators’, might that be more than the vessel owners?  For example, disponent owners or even charterers or ship managers?

The term ‘fleet’ obviously also has the potential to cause confusion.  It seems unlikely that the use of single-purpose vehicles (SPVs) to own vessels would allow an operator to avoid the proposed charges.  At the same time, we query whether the authority charged with enforcing the service fees would be looking to identify the ultimate beneficial owners (UBOs) of all ‘operators’ whose ships enter the US in order to determine whether they are also UBOs of other Chinese-built vessels. That would be quite an undertaking.

Initial industry reaction suggests that the market contemplates an increase in freight rates, a substantial diversion in traffic towards Mexican ports, and a cancellation of some newbuilding contracts at Chinese yards. Whereas it has been anticipated (by Fearnley Securities, as reported in Tradewinds) that the move would have a large impact on container shipping (where COSCO is a major player conducting huge US trade), and in car carriers where there are many Chinese-built ships, LNG vessels might be lesser affected as many are built in South Korea.

Charterparties

The shipping industry will naturally be interested as to how such measures would be dealt with by the allocation of risk under charterparties, particularly for traditional bilateral ventures. Hill Dickinson has already been asked to advise on suitable clauses in this regard.

For new fixtures, pricing changes are likely to be built into applicable rates and passed on to customers and consumers.

Time charters

Under many time charter forms, charterers are to pay for all port charges, commissions and consular charges for charterers’ port calls. There are sometimes carve-outs for charges occasioned by the vessel’s flag, but the issue here is ownership and origin. In this scenario, if the new service fees are effectively port charges, they could fall to charterers.

Attention should also be given to any clauses allocating taxes and dues on the vessel.

There is no common law concept of force majeure (FM) in English law but there is the doctrine of frustration. Many contracts will incorporate a clause intended to bring in concepts of FM.

However, neither are likely to be triggered by new service fees of this type. It is not enough to bring about the operation of frustration that circumstances have occurred which impose a heavier financial burden on one party than was expected. In the Court of Appeal decision in The Eugenia [1963] 2 Lloyd’s Rep. 381, it was stated that:

The fact that it has become more onerous or more expensive for one party than he thought is not sufficient to bring about a frustration. It must be more than merely more onerous or more expensive. It must be positively unjust to hold the parties bound.”

Even the commercial bargain becoming “a commercial disaster” for one party is not enough. In The Sea Angel [2007] 2 Lloyd’s Rep. 517 (C.A.) the Court of Appeal agreed that a charterer’s expected burden of paying a final three days’ hire becoming a requirement to pay hire for 113 days did not amount to frustration.

Although the sums arising from these new service fees are substantial, they are unlikely to represent a substantial enough percentage of the overall maritime adventure so as to give rise to any frustration or FM. This is further the case where the contractual bargain already contemplates port charges and allocates them to one of the parties.

Voyage charters

As always, the allocation of costs and risk depends on the wording of the agreed charterparty.

For those concluded voyage charters which might be affected by the proposed new service fees, standard forms such as the Asbatankvoy provide for charges (by which, for these purposes, we mean taxes and dues) on cargo and freight to be for the charterers, and charges for services provided to the vessel for the owners. However, in Asbatankvoy the charterer is liable for the use of any berth or similar arranged by the charterer.

Similarly, under GENCON 94, the owners are to pay all dues, charges and taxes customarily levied on the vessel, howsoever the amount thereof may be assessed.

As this service fee is not related to the cargo, it is likely to fall to the owners in the majority of cases and be viewed as a cost of performing the contractual voyage.

However, Asbatankvoy additionally provides that, the Charterer shall also pay … any unusual taxes, assessments and governmental charges which are not presently in effect but which may be imposed in the future on the Vessel or freight.”

Where such wording is present, it may be argued that the new service fee instead falls to charterers’ account.
As always, the operation of these standard wordings will be subject to the operation of amendments and/or any additional rider terms agreed between the parties, the latter of which may take priority, see for example London Arbitration 1/08.

Already Hill Dickinson is seeing revisions to charterparty wording, both bespoke terms and amendments to standard charterparty forms for voyage and period fixtures.

How our marine lawyers can support you

If you’re experiencing any issues in relation to international tariffs, our experienced shipping lawyers can provide invaluable guidance and ongoing support.

Source: Hill Dickinson LLP