Advice for BIMCO members in relation to proposed US trade action
LONDON : On 21 February, The Office of the United States Trade Representative (USTR) announced it was inviting comments from the public in respect of its “Section 301 Investigation of China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance”.
BIMCO has submitted comments for the public hearing which will be held on 24 March 2025. You can view our letter with comments to the USTR here.
While the content of the proposal is available to study, it is, however, not yet clear how this will develop and how a potential trade action will be initiated. BIMCO will follow the situation closely and provide updates to our members and on our website when more information is available.
Since the “Proposed Actions” were published we have received many inquiries concerning both existing and new charter party clauses and whether they may be relevant for the potential outcome of this situation.
For existing charter parties, it may not be possible to include additional clauses to cover such unexpected scenarios and one must scrutinize the applicable contract to determine whether it contains any provisions which could be relevant in the context of establishing who might be responsible for the proposed fees when calling at US ports.
While this is not an exhaustive list, it will be relevant to consider the following in respect of shipping contracts:
How does the contract allocate “fees”? And if it turns out that it will be imposed in a different form, what about taxes and tariffs?
Does the contract cater for a potentially relevant “hardship” clause, and if so, could this be relevant in the present case?
Could the “Proposed Actions” be considered to be a “force majeure” event or does the contract otherwise contain clauses defining that such events could create grounds for one or both parties to terminate the contract?
These are only a few examples to consider, but we think that in many cases existing contracts must be performed and depending on the outcome of the “Proposed Action”, it may be a question of facts as to who will pay for the proposed fees. Under time charter parties, usual port fees are generally paid by the charterers and under voyage charters or contracts of affreightment (COA), the party appearing as owners in the contract will generally pay for the port fees. It can be that voyage charterers may have agreed to be responsible for the port fees or the contract may contain a provision allocating a split between the parties. In any event, however, we do not know at this stage whether the contemplated fee in fact will be imposed as part of the port fees and it will consequently be necessary to establish exactly in which form the fee will be imposed to determine the division of costs in the individual contract.
For new contracts, it is vital to ensure that the possible effect of the “Proposed Actions” are considered during negotiations and for voyage charters consider how this may impact the freight rate. But also other clauses, for example in respect of “fees”, “tariffs” and “taxes”, to mention just a few, must be carefully considered to evaluate and address the potential effect of the “Proposed Actions” in charter parties and other shipping contracts.
One major challenge however, is that until a final proposal is known it is difficult to guide on specific situations. Once we have clearer information in this respect, BIMCO will be better able to advise on potential risks and recourses. As BIMCO creates standard clauses to be used across the industry, it is important to understand the exact scope before embarking on any drafting. Once we have a clearer picture, the BIMCO Documentary Committee will discuss and evaluate a potential need for standard charter party clauses.
The ”Proposed Actions” operate with the term “Maritime Transport Operator” and subject to the individual contracts, this term may not provide clarity in respect of which party may potentially be responsible for paying a given fee. Furthermore, in certain parts of the industry where operators’ fleets are not constant, it could be challenging to establish the composition of the fleet and which category it will fall in.
Even if an operator of tonnage does not have a large fleet of Chinese built tonnage, it will be necessary to consider for each and every contract (voyage or COA) that the final performing vessel could be Chinese built and hence this will influence many charter parties, both voyage, time and COA’s.
For the shipping industry at large, it will be of huge importance that there is clarity about the outcome of the “Proposed Actions”. While the contractual relationship is an obvious source of concern, the trading of the international commercial tonnage – Chinese built or not – will be influenced by such a far-reaching proposal.
Source: BIMCO