US Trade Representative Launches 301 Investigation into China’s Shipbuilding Industry
On April 17, 2024, the Office of the United States Trade Representative (“USTR”) announced the initiation of an investigation pursuant to Section 301 of the Trade Act of 1974 regarding allegations that the People’s Republic of China (“PRC”) has targeted the maritime, logistics, and shipbuilding sector for dominance and engages in a wide range of unreasonable or discriminatory acts, policies, and practices that provide unfair advantages across those same sectors.
The USTR’s initiation is predicated upon a March 12, 2024, petition to the USTR from several US unions (the “petition”). The petition asked the USTR “to address the unreasonable and discriminatory acts, policies, and practices of the [PRC] to dominate the maritime, logistics, and shipbuilding sector that burden or restrict U.S. Commerce.” Section 301 tasks the USTR with enforcing US rights under trade agreements and responding to certain foreign trade practices that are “unjustifiable” or “unreasonable” and burden US commerce.
On April 22, 2024, the USTR also published a summary of the allegations under its investigation, with written comments due on May 22, 2024. These comments include objections by Canadian and European shipowners to the application of port fees to Chinese-built vessels. USTR will also convene a public hearing on May 29, 2024, where it will hear from representatives of the US and China shipbuilding industries.
At the conclusion of the investigation, the USTR will make a final determination. The USTR’s final determinations are generally made 12 months after the investigation begins; however, the USTR has indicated the investigation will be completed well before the 12-month timeline. Following the final determination, the USTR may (and in some cases must) decide to take a retaliatory action, in which case it must implement that action within 30 days. Retaliatory actions include (1) imposing duties or other import restrictions, (2) withdrawing or suspending trade-agreement concessions, or (3) entering into a binding agreement with the foreign government to either eliminate the conduct in question (or the burden to US commerce) or compensate the United States with satisfactory trade benefits.1 These actions will terminate after four years, unless the USTR receives a request for continuation and conducts a review of the case.
Specific to this investigation, if the USTR finds China’s actions are unreasonable or discriminatory and burden US commerce, it will recommend remedies to the President. The petition’s remedies recommendations include (1) a fee on vessels built in China that dock at US ports, (2) the establishment of a shipbuilding revitalization fund with proceeds from that fee, (3) actions to support stronger demand for US-built vessels in light of unfair competition from China, (4) actions to address China’s drive to dominate port and logistics infrastructure platforms and equipment, and (5) negotiations with other major shipbuilding countries to address concerns regarding their government support and coordinate measures to address China’s unfair practices. If USTR recommend remedies to the President in this case, it remains to be seen how many of these recommendations, if any, would be adopted by the agency.
Interested parties should continue to monitor the investigation as it progresses.
