US special port fees and China’s retaliatory measures explained
A briefing by global law firm Watson Farley & Williams provides details of the special port fees on Chinese-built, -owned or -operated ships (subject to certain narrow exceptions) that came into effect on October 14, along with retaliatory Chinese measures.
The background to these measures stems from a petition brought by five labour unions in the US who complained of unfair practices by China in the maritime sector which they believed posed a discriminatory threat to US commerce, it explains. The investigation was initiated under section 301 of the US Trade Act 1974, and led to the Office of the US Trade Representative imposing the special fees.
Under its Section 301 Ships Action, ‘Chinese ownership’ of a vessel is deemed by the USTR to be a situation where 25% or more of the entity’s equity is held by the Chinese government, Chinese companies or individuals, WFW specifies, ‘China’ being considered to include Hong Kong and Macau as well as mainland China. Extra tariffs have also also imposed on the import of certain Chinese-built port equipment.
In response, retaliatory measures by the Chinese government were announced by the country’s Ministry of Transport last week.
Essentially US vessels will now incur special port fees if they call at Chinese ports, the targeted ships being:
- ships owned by US businesses, organisations and individuals;
- ships operated by US corporations, organisations and individuals;
- ships owned or operated by enterprises, other organisations in which US enterprises, organisations, and individuals directly or indirectly hold 25% or more of the equity, voting rights or board seats;
- ships flying US flag; and
- ships built in the US.
The initial fees payable are set at RMB400 (approx. US$56) per net tonne and increase over time.
Then this week, the Chinese MOT issued its implementing regulations, which made some important clarifications to the earlier announcement, relates WFW. These include exceptions to the measures for a) Chinese-built ships, and b) ships arriving unladen for repairs – i.e. to help safeguard China’s shipbuilding and shiprepair industries respectively.
Also, the arrival form that needs to be completed by every ship calling Chinese ports was issued this week, WFW reports. This brings some further clarity, it says, “in particular as it is the only official document produced in both English and Chinese regarding the MOT Announcement. Parties should consider that the English language version of this document will prevail over any unofficial translations from Chinese of the MOT Announcement or implementing rules.”
The declaration form - which vessels must complete seven days prior to entry into China - is a self-declaration form which will require vessel owners and operators to analyse for themselves whether or not they meet the criteria set out in the MOT Announcement. If the declaration is wrongly made and the fee not paid, the vessel may not be able to enter or leave the port until its dues are paid. If the vessel has already left, the fee will be due before the next call in China.
WFW concludes that “careful analysis of corporate structures and consideration of shareholdings will need to be undertaken to minimise the risk of exposure to the special port fees.” This is something that WFW says its team is already doing across the globe for a wide range of clients.