Some months back we reported on the proposed US charges on certain Chinese owned and operated vessels and on all non-US owned car carriers.
In terms of response, BIMCO has produced a new USTR clause. There has therefore been a chance for all concerned to adapt. That said, there are still potential legal issues where historic charters do not contain the BIMCO clause. As the start date for USTR charges (14 October 2025) approaches, clients are approaching us for advice on how to deal with the new charges and, more importantly, on how they can avoid or reduce their exposure to these charges.
In terms of operation, the burden for determining liability for USTR is on the vessel operator. Payment must be made via a Portal at least three days before the vessel calls at a US port. Failure to pay on time could cause the vessel to be refused entry to the port or denied permission to load or discharge. It seems likely therefore that there will inevitably be lost time for some vessels and, in turn, off-hire and laytime/ demurrage related issues and potentially disputes. For example, can a ship tender a valid NOR if the USTR payment has not been made? Does it need to re-tender NOR and how will that affect laytime and demurrage? What about the impact of the US Federal Government Shutdown? What happens if a party pays the USTR fee but the payment is not recognized or processed in time? These are all possible scenarios that may lead to legal issues.
The charges themselves are easily calculable. For Annex 1 it is US$50 per net ton for ships owned or operated by PRC entities. For Annex 3 it is US$14 per net ton for non-US built vehicle carriers. Net tonnage is listed for all vessels and so it is a simple enough calculation. However, Annex 2 could raise issues. This covers PRC built ships arriving in the US to discharge. The fee is the higher of US$18 per net ton (easy enough to calculate) or US$120 per container discharged, so it may be necessary to know how many boxes will be discharged in advance if payment is not being made on a net ton basis. Again, there are questions as to what happens if there is an incident during discharge, e.g. a fire, which requires more containers to be discharged than originally planned?
In terms of avoiding these charges, some of the larger container lines have simply redeployed tonnage to reduce their exposure. For example, where possible they now use Japanese or Korean built vessels owned or operated by non-PRC companies for US trade and PRC built or operated vessels on Asia- European or intra-Asia loops. However, this is not possible for all lines. It is predicted that carriers such as COSCO and OOCL will be particularly hit whilst Maersk and Hapag Lloyd will largely escape exposure. Most container operators are also involved in Vessel Sharing Alliances which are essentially an arrangement to share container slots on vessels operating within the Alliance. The problem of redeployment is likely to be an Alliance related issue: the Alliance shifts PRC built or operated vessels away from US trade in favour of non-PRC built or operated vessels thereby securing an advantage over other Alliance operators who may not have that capability.
We have seen some increase in clients enquiring about issues relating to new vessels inked some time ago. In many cases, those vessels are backed by PRC leasing finance and long-term charters. Any way out of those charters in favour of alternatives from non-PRC entities is attractive for operators facing a potential US$50 per net ton exposure as opposed to a more lenient US$18 per net ton or US$120 per box, particularly if those vessels were earmarked for US trade or long term contracts of affreightment. Of course, terminating charters and ship building contracts is challenging and can give rise to legal issues and potentially large exposures depending on market conditions. The more favourable option seems to be redeployment of the vessel once built and delivered to avoid exposure to USTR. Having said that, this does have an impact on the earnings capacity of these ships due to what is in effect an economic restriction on their trading area.
It remains to be seen what impact USTR will have on bulk trading as opposed to containers. Bulk vessels are less likely to be operated in pools and so are more exposed to the charges. There is however an exemption for bulk carriers below 80,000 DWT. It remains to be seen how this cliff edge will impact trading to the US. Ultimately however, the most likely impact of USTR is increased freight rates for US imports which, in the same way as tariffs, is likely to be inflationary.
As for car carriers, the USTR is at least universal in that it applies to all non-US built car carriers – which is most of them. Whilst there is an impact it is at least a fairer impact as it does not at present leave open room for one carrier to secure an advantage over another.
Please contact the BDM team if you have any issues arising from the USTR.
Nick Burgess
Partner
