By Land and By Sea
By Land and By Sea
S4.E19 - USTR Sec 301 Hearings & Everything Else You Missed This Week
Topic of the Week (3/28/25):
Doesn’t it feel like there’s a LOT happening in maritime right now? This week was dominated by the USTR 301 tariff hearings, but don’t worry, we’re covering that and everything else you missed! Let’s dive in.
⚓ The Maritime Professor® presents By Land and By Sea Podcast 🎙️ – an attorney breaking down the week in supply chain with Lauren Beagen (Founder of The Maritime Professor® and Squall Strategies®)
Let’s get into it...
🔹 Top Three Stories of the Week:
1️⃣ Brent Sadler Nominated as the New Maritime Administrator
🚢 Brent Sadler, nominated as the U.S. Maritime Administrator, brings a wealth of experience from his distinguished 26-year career in the U.S. Navy. I'm excited to see how he’ll tackle America’s maritime challenges with President Trump taking such a significant interest in the success of this industry.
2️⃣ Petitions Against Federal Maritime Commission’s Recent Final Rules
⚖️ The petitions filed against the FMC’s Detention and Demurrage Billing Practices rule and the FMC's Unreasonable Refusal to Deal or Negotiate continue to evolve.
3️⃣ FMC Launches Investigation into Global Maritime Chokepoints
🌍 The FMC is investigating key chokepoints like the Suez Canal, Panama Canal, and Malacca Strait to determine if congestion, geopolitical tensions, and environmental factors are creating unfair conditions for U.S. trade. This could have major consequences for global shipping.
The Maritime Professor® is offering an e-course on the subject to help get you up to speed. (Listen to the discussion for a discount code)
⬛ Deep Dive: United States Trade Representative (USTR) Section 301 China Shipbuilding Hearing
This week, the USTR 301 hearings took center stage, with a focus on China’s dominance in shipbuilding. USTR has proposed fees of up to $1.5 million per ship for Chinese-built or Chinese-flagged vessels entering U.S. ports. Two days of testimony and hundreds of comments filed showed a great interest in the topic.
🔹 The Maritime Professor® provides training and education for global supply chain professionals. Learn more: www.TheMaritimeProfessor.com
🔹 Listen to our podcast – NOW AVAILABLE: https://www.themaritimeprofessor.com/podcast
❗ This content is for educational purposes only and not legal advice. If yo
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🔗 Visit www.TheMaritimeProfessor.com to learn more and stay ahead in global ocean shipping! ⚓
I got soul coming through, flying free. Skies are blue, all the waves are mixing room. I got soul coming through, won't stop in the beat. And on top of the world, catwalk to the beat when you see me coming Mixing room. Oh, everywhere I go, I'm in the spotlight. This is a good life. Oh, I'm living gold. This is what good life I'm living for you. This is what it looks like On the tiptoe. How it works.
Speaker 1:Doesn't that feel like there's a lot happening in maritime all at the same time? It's good, I swear it's good. This is a good thing that we are having all of these conversations, because we're moving things forward, but this week was taken over by the USTR 301 tariff hearings, so we're going to, of course, discuss that briefly. I'm not going to dive in too too deeply, but I do want to just make sure we're all on the same page. What has been going on with the USTR 301 China shipbuilding hearings, and you know what? I'm going to alert you to everything else you might have missed this week. There's other things that are happening. There's a lot of fires all at the same time. I want to make sure that you know about all of them and not just the one biggest one.
Speaker 1:Hi, welcome by Landed by Scene Attorney Breaking Down the Weakened Supply Chain presented by the Maritime Professor me. I'm Lauren Began, founder of the Maritime Professor and Squall Strategies, and I'm your favorite maritime attorney. Join me every week as we walk through both ocean transport and surface transport topics in the wild world of supply chain. As always, the guidance here is general and for educational purposes only. It should not be construed to be legal advice and there is no attorney-client privilege created by this video or this podcast. If you need an attorney, contact an attorney. So, before we get into the discussion of the day, let's go through my top three stories of the week and I'm also calling this things that you should also be paying attention to.
Speaker 1:All right, story number one this would be the top thing we'd be talking about if it weren't for the USTR 301 hearings, and that is Brent Sadler has been nominated to be the new maritime administrator. So that's the maritime administrator in charge of the maritime administration, which is MARAD, which is out of the Department of Transportation, which, if you know and perhaps maybe it's time we do an FMC versus MARAD breakdown but if you listen to this episode or this podcast, you know that every once in a while we do a compare and contrast of FMC and MARAD. We talk often about FMC. It's a different agency than MARAD. Marad is the promotional arm. They promote the US flag fleet. They promote and ensure that we have merchant mariners. They create and preserve ready reserve fleets. They have a whole host of things that are aligned with preserving and promoting the US interest in the maritime world, which, as you can imagine, is a very hot topic these days, I guess I'll say. But also it's a very important role. So Brent Sadler is coming from the Heritage Foundation and has been nominated to be the new Maritime Administrator.
Speaker 1:Great opportunity for what I'm finding to be. I think that he has some really great attributes and certainly great experience that I think will help him in this new role. I want to direct you to two different articles that I found helpful myself. One is by Laura Curtis. She works for Bloomberg. She has an article out I believe it was last Friday right after the announcement was made where she talks a little bit about Brent and his experience and his perhaps where he will be going with his interest in this role. But also John Conrad of GCaptain. He put out an article as well Both of those. I think those two articles complement each other well on kind of reviewing Brent's experience.
Speaker 1:So my general thoughts, though from the little bit of research that I did this week, he seems to really be an out of the box thinker and he really has some interesting ideas on, particularly one that I'm kind of calling offshore transloading. I think he might refer to it as multimodalism, but it has to do with this offshore transloading, right, somehow transloading cargo, and not only containerized cargo but just cargo offshore and not necessarily coming into birth at a port. And you know what I like about it. And right, automatically, it seems a little bit like how would that work? But you know what I like about it. And right, automatically, it seems a little bit like how would that work? But you know what I like about it is where an otherwise automatic no may stop from kind of that further critical thinking. It feels like he's presenting this idea as an idea that needs a little bit more of critical thought behind it to see if there's still golden nuggets that can be gained from the concept behind it. To see if there's still golden nuggets that can be gained from the concept and I appreciate that, you know, through the years, I guess. I guess I would say that I've kind of approached things similarly when I'm faced with a no, or that's silly, or like a no way, that won't work, it's. It's kind of this okay, well, thanks for your feedback, and then you just kind of pivot around that roadblock it. You know, this idea of a offshore transloading. Maybe it has legs, maybe there's something there. I like the approach of let's move past the traditional thinking, let's move past the way that it works to see if there's something else. And actually and we'll talk about this in a minute but he recently there was a book that was recently released and he wrote a chapter and he talks a little bit more about this idea and kind of the ways that it might actually work. So, yeah, all right, so let's keep going on Brent, though.
Speaker 1:Brent Sadler, recently nominated to be the US Maritime Administrator, truly brings a wealth of experience. He has had a 26 year career in the US Navy and his tenure as a senior research fellow at the Heritage Foundation. Career in the US Navy and his tenure as a senior research fellow at the Heritage Foundation so what I found on his positions on the Jones Act. So the Heritage Foundation, where he worked. He's been a senior research fellow there. Historically, the Heritage Foundation has been, I don't want to say categorically opposed to the Jones Act, but perhaps critical of the Jones Act I think would be a fair has had concerns.
Speaker 1:I want to be careful there, but either way. So that's the Merchant Marine Act of 1920. And that mandates essentially this is an oversimplification, but essentially that goods transported between US ports need to be carried on ships that are US built, us owned and US be carried on ships that are either US that are, that are US built, us owned and US crewed. But it seems like Brent's stance might be a little bit more nuanced. In his 2024 report Ensuring America's Maritime Security, he acknowledged that the Jones Act intent to bolster the US maritime industry, but he notes that inadequacies in achieving this goal Right. So he, he, it seems like he kind of likes the intent to bolster the US maritime industry. That's something that that I think he he seems to believe very strongly in, but that there's some inadequacy. Like I said, he suggests that while the act has not fully met its objective, the wholesale repeal would perhaps supplementary measures without those supplementary measures could be counterproductive. Instead he seems to be advocating for stronger cooperation with allies to address the immediate shipping need, while working to regain American maritime competitiveness. And I think that last part that regaining American maritime competitiveness is really what the focus of anybody coming into this role would be, and it seems that Brent's aligned with that, which right that's aligned with the administration and all of the things that the Trump administration has been saying is that we really need to regain America's maritime competitiveness as part of the initiative and the theme that's going along with this administration and in the Ensuring America's Maritime Security article.
Speaker 1:He also identifies geospoofing as a major concern. He references a case of a British tanker being in Iranian waters and being held versus thinking that you were actually in the international waters. This geospoofing I like that he brings it up and I like that he brings it up recently. I think that this one I agree that this is a major concern and something that's worthy of more attention, certainly when you're in international waters. I teach law of the sea and so there's a fine line between things that can happen in one area of water and another, and not knowing exactly where you are is a major, major problem, so I like that he brings up geospoofing there.
Speaker 1:Key issues addressed at the Heritage Foundation. During his time at the Heritage Foundation the things that I've seen that he's focused mostly on, it seems, are maritime security, naval warfare and advanced technologies kind of advancing and analyzing the integration of cutting edge technologies into naval operations. Shipbuilding revitalization he's advocated for Ships for America Act and other shipbuilding initiatives and tax incentives and workforce development and global threat assessment and providing testimony on emerging global threats and the necessary course corrections to address them. He comes for the Navy, the US Naval Academy. He graduated with honors. He earned a degree in systems engineering and robotics and a minor in Japan excuse me, in Japanese. He actually did study in Japan quite extensively. He was an Olmstead scholar in Tokyo. He obtained a master's of arts from Yoki University and a master of science from the National War College when he came back stateside and a Master of Science from the National War College when he came back stateside. His 26-year Navy career included operational tours on nuclear-powered submarines, roles on the personal staff of senior defense department leaders, service as a military diplomat in Asia and his expertise at Heritage really seemed to focus, like I said, on maritime security, the integration of advanced technologies into defense and his recently published chapter in the just this week released book.
Speaker 1:This is Returning from Ebtide and you may have seen on LinkedIn this Returning from Ebtide book. It is a free PDF download. So if you go, if you pull it up, I think it's under the US Naval Institute Under the picture of the book there's a PDF link. You can actually download the PDF version. But this is what I wanted to talk about.
Speaker 1:He talks about the commercial shipping industry and the United States' interest in kind of returning to commercial shipping as a power in that world. But he also notably discusses offshore transloading. Like I said at the outset, he mentions that the Navy's actually already demonstrated the ability to deliver a 50-pound cargo 200 miles to a ship at sea using a drone. Okay, so we think about 50-pound cargo, that's nice, 200 miles, that's impressive. But that's not what the container cargos are using. But he actually addresses that. He says for commercial use, this would have to be significantly scaled up. But it's kind of a test case, right. He's saying a 50 pound cargo 200 miles to a ship at sea using a drone, that's a feat, that's a technological advancement, that's impressive. And that's a feat, that's a technological advancement, that's impressive. And so, like I said, I appreciate the out of the box or breaking the mold, thinking of well, it seems wild, but is it? Can we pursue this? Is this something that has maybe a commercial applicability to it? I kind of like that. I think that that's. It's a very can I say archaic industry. It's a very. Things have worked well the way that they've worked for a very long time, and so I appreciate fresh, fresh looks and new technologies and and new ideas entering into the world. I'm really interested to see where Brent takes this role. I think he, more than any other administrator in recent years, really has this rare opportunity to actually move the ball forward and grow a US flag fleet, grow the Mariner base and really ready a ready reserve fleet, given this administration's not only support but prioritization of these initiatives.
Speaker 1:Last week at the American Association of Port Authorities Legislative Summit, I talked about this. Last week, kellyanne Conway spoke as a keynote. She said that it was entirely President Trump's call to have shipbuilding included in his remarks in the joint address to Congress. So what happens is he's given a whole list of topics that could be included in his final remarks and he suggested of what gets included, but he has final say over what's included. And not only was shipbuilding not taken out, it was obviously included. The standing up of a shipbuilding office was included. So I think that this is really cool. I think that this is something that there's a real opportunity for Brent to make big moves in this industry, and he's got a really great list of experience. I know that we've heard from some people already this week saying that it would be nice if we had a little bit more of a Merchant Mariner perspective, but we still don't have a deputy. Maybe we'll have a deputy of somebody who's coming from the Merchant Mariner side of things to help support this role. I think this is cool. I'm excited to see where Brent takes it. I think that his experience, his knowledge, is vast. He comes ready to get to work, it feels. So I'm excited to see where he takes this and I'm going to be watching with interest and excitement to see where we go, because we've needed a leader in this role and now we have one, and so let's get to work. All right.
Speaker 1:Story number two a few updates on the petition. So we've talked about the FMC's final rules. We have the detention of urge billing practices rule that has a petition filed against it, and we also have the unreasonable refusal to deal or negotiate. That has a petition against it. Not much has happened in a while there, but I wanted to bring it back around just to bring it top of mind. We're getting closer to when we might be having some movement on these two petitions. So, as you know, if you listen to this podcast, but if you're not aware, so the detention to merge, billing practices rule the final rule came out last May so we've had it almost for a full year now and it has a petition filed against it for essentially going too far. Right, there's a few different things that are. It's a petition against the final rule to really kind of review some of the things that are within the rule but hinged on this exceeding authority, arbitrary and capricious some of these thresholds.
Speaker 1:But what I see is the main issue here is that direct contractual relationship for motor carriers and the inability through the rule to directly bill motor carriers for detention to merge. It was the World Shipping Council who filed this petition and this is an oversimplification. This summary is not intended to be an overview summary of what's actually happening. But that's the rule, right, it's detention to merge, fine, and billing practices. There's that direct contractual relationship. That is a new tenant of this rule. But the direct contractual relationship does not extend to motor carriers, as the FMC explains, and the World Shipping Council has taken issue with that in the form of this petition. We had the American Trucking Association, agtc, association of Bi-State Motor Carriers, a whole slew of trucking associations, join into this as filing a joint amicus curiae brief, so a non-party friend of the court. They offered information, expertise, general insight to the court on the matter. Final rule. So what the World Shipping Council has said here is that the final rule prohibits billing motor carriers even when those motor carriers have contractual relationships with the ocean common carrier. So they're saying direct contractual relationship, that's the tenant. But they're saying sometimes even the motor carriers have direct contractual relationships with the Ocean Common Carrier and so there the intention from the FMC was that the direct contractual relationship would be best positioned to receive the invoice. The World Shipping Council saying look, sometimes they are the direct contractual relationship and then they therefore are the best authority to receive the invoice. The World Shipping Council then says this fundamental mismatch between reasoning and result renders the commission's action both outside of its statutory authority and arbitrary and capricious. They are calling for the final rule to be vacated. So that's kind of where we were.
Speaker 1:We were waiting on an oral argument scheduled. It was scheduled for March 13th. Unfortunately we don't have a lot of readout from that. The transcript was not public. So if you go to the PACER PACER is the Public Acts Record, something, something Court Electronic System, I think. But PACER is where you can pull any of these documents. The minimal amount of money I think it's 10 cents or whatever per page, but you can pull these documents to actually see what's happening in the docket. You can see that the oral argument happened on March 13th, but it says that the transcript's not public. So unfortunately we don't know what was said in that oral argument.
Speaker 1:I'm going to keep watching. For now, not legal advice, but for now the detention demurrage rule remains in place and the petition continues on. But that's a possibility here is, if the Court of Appeals for the DC Circuit determines that something's happening here that needs to be overturned or vacated, it could potentially impact this final rule that we all have had integrated into common business practices these days. So this is one worth watching, this detention to marriage billing practices petition. We're getting closer, I think, to having some information, perhaps some decisions being made by the court that would potentially impact this detention to murder rule in how it's supposed to be or allowed to be out there in the world. So I'll keep watching it for you.
Speaker 1:The other rule that has a petition against it is this unreasonable refusal to deal or negotiate with respect to vessel-based accommodations. It's a mouthful of a title. This was released right around the time that we were having our port strike, october 1st port strike. This was released, I think, with that last week of September, so it kind of got a little snowed in news-wise, but it did come out. Unreasonable refusal to deal or negotiate is a final rule that was released by the FMC is a final rule that was released by the FMC.
Speaker 1:There was a motion to dismiss that the court wanted to address and it wanted to have a briefing schedule on the motion to dismiss. So I was a little concerned that we weren't going to see discussion of the actual topics and rather that we were just going to see a discussion over this motion to dismiss. The briefing schedule was that March 3rd is when the petitioner's brief was supposed to be filed, april 2nd is the respondent's brief that's the FMC and then a reply brief from the petitioner April 23rd, with final briefs totally being due May 14th. So we passed that March 3rd. We did have a filing from the World Shipping Council and I was happy to see that they went into substantive issues and not just related to the motion to dismiss.
Speaker 1:So some of the issues that they presented to the World Shipping Council was that they said the FMC exceeded its authority through the rules review of quoting rates that are so far above market rates that they cannot be considered a real offer or an attempt at engaging in good faith negotiations and information regarding ocean carriers pricing strategies. So that's part of what's in that final rule right, this unreasonable refusal to deal and negotiate, including that one of the determinations that the FMC would review is this quoting of rates that are so far above market rates that they cannot be considered a real offer or an attempt at engaging in good faith negotiations. They cannot be considered a real offer or an attempt at engaging in good faith negotiations. This is interesting because the FMC does regulate reasonableness of rates, but not the rate itself. So this argument is actually a fair argument, well received, in that it suggests, or it says, that perhaps the FMC is getting too close to that rate setting area right by saying if the FMC is reviewing the quoting of rates that are so far above market rates, it's getting more into the actual number of the rates and not a general reasonableness, although you can see both sides right that maybe you need to know the numbers to get to the reasonableness. If it is reasonable versus not reasonable, this is going to be. This is kind of one of those issues that's tale as old as time. Where the FMC authority is is they're not setting the rates, they're not getting into the specific numbers, but they are on the reasonableness. How close can they get to the rates itself before they've gone too far? In my opinion, it feels like that's where this is hinging a little bit.
Speaker 1:The second thing they brought up asserted that the final rule is arbitrary and capricious and exceeds authority because it requires this documented export strategy. This is something that we've talked about with this unreasonable refusal to negotiate this documented export strategy. I've been weary of this documented export strategy strategy. I've been weary of this documented export strategy mostly because I wanted to see the discussion and the justification and I think that a petition against the final rule with a documented export strategy was probably not surprising. This is a little bit of a departure from normal, I guess I would say, the way that the FMC typically moves, requiring this documented export strategy. The argument from World Shipping Council says it fails to provide meaningful guidance on what should be included in such a policy or how it would be used in evaluation of reasonableness, and I think I agree with that. I think I would just like to see a little bit more of a justification on this documented export strategy and a little bit more of a discussion there. So hopefully that'll be in the filing from the FMC in just next week. And then the last thing that they said and this is, like I said, kind of a summary of the things that they presented the World Shipping Council in their petition or in their filing their brief, that they just filed counsel in their petition or in their filing their brief that they just filed, they said and departs the FMC departs from past commission precedent without justification by removing business decision as expressed factors to be considered in reasonableness analysis.
Speaker 1:I've always taken a little personal issue with the documented export strategy. Like I said, not entirely, but I just wanted a little bit more justification. I always thought that ultimately that is what a petition filed against this rule would probably have right the strongest argument against. This is just one side of the coin. I'm interested to see what the FMC's brief that's going to be filed next week says and then the final response in May. I never like to do too much of an analysis on one side versus the other briefs until we have them both filed so we can kind of compare and contrast, see what's going on. But ultimately I'll report on what the court decides, because it's one thing for me to make decisions or opinions is really what they are, but it's another for what the court decides, and that's where we really want to follow. So I'm going to be watching to see what the court does with either one of these, the oral arguments, if we get any sort of information out of the Court of Appeals for the DC Circuit on the oral arguments on the detention to marriage billing requirements or on this unreasonable refusal to negotiate. We just have one side. Next week we'll get the other filing from the FMC. We'll see if they respond to the motion to dismiss or if they go for this more substantive discussion like the World Shipping Council did in their filing and then a final response in May. All right.
Speaker 1:Story number three. Did you miss my webinar yesterday? There were quite a few people. It was a great webinar. It was a deep dive into FMC's fact-finding investigation to examine whether transit constraints at some of the world's most critical shipping passages are creating unfair or unfavorable conditions for US trade. Don't fret, there's a lot going on. That's why I actually created an e-course for this topic. So I'm going to be releasing a code, a special code for the listeners here. It's new release, all spelled out, new release. You'll get a special discounted pricing through the month of April if you use that code. Newrelease. But essentially, what's happening here? We've talked about this.
Speaker 1:I think we talked about this last week the FMC investigation into global maritime choke points. They launched an investigation into vessel transit constraints at critical global maritime choke points all across the world. They want to examine how congestion, geopolitical tensions, environmental factors, regulations, requirements, restrictions, kind of all those things that might gum up any of these maritime choke points. That's what the investigation is focusing on. It's focusing on high traffic trade routes such as the Suez Canal, the Panama Canal, the Malacca Strait, the English Channel, the Singapore Strait. I mean it's all over. There's seven different outlined northern sea route, seven different outlined areas where delays and bottlenecks could pose, or have posed, significant risks to global trade.
Speaker 1:What the FMC wants to get to know is you know, initially I say that this investigation is benign on its face. Of course there's geopolitics involved in probably every one of these areas, but I would consider this to be an honest review, an honest review of all of these maritime choke points. They want to know, are any of the restrictions in these areas, whether they're environmental related or if they're otherwise regulatory related or if they're otherwise regulatory? You know, maybe it's a pilot, maybe it's surcharges, maybe it's an icebreaker requirement, whatever those requirements in these areas are. I think what the FMC is really going to look at here is are there opportunities to take advantage of the situation? And have those opportunities to take advantage been taken advantage of? So, to the tune of, is this unfavorable shipping conditions that have been created in these areas unfair, unfavorable shipping conditions?
Speaker 1:The significance of this investigation really lies in its potential regulatory and industry-wide impact. Right, these choke points serve as vital arteries for global commerce. Disruptions can lead to cascading effects on supply chain, shipping costs, market stability, and that's why the FMC has decided to undertake this investigation. But the FMC's findings. Should they find unfair or unreasonable excuse me unfavorable shipping conditions could result in corrective actions. That's pretty significant. The FMC could include a $1 million per voyage as a corrective action, for if they find a particular common carrier, vessel owner, vessel operator, even if it's related to a country, it could assess those million dollars per voyage against vessels attached to that country. They could also turn away vessels of a certain flag, right, and that's where the Panama Canal becomes really interesting as part of this conversation.
Speaker 1:Initially you might look at this investigation and say, okay, well, this is a Panama investigation plus a few. I wouldn't say that I don't think that this is a Panama plus a few. I think that they are honestly looking at each and every one of these seven choke points, but then also they've opened it up to if other things happen. Maybe there are other areas that they should take a look at to make sure that the free flow of good continues and that's really the heart of what the FMC is looking at here is the free flow of goods continuing to move across the world for the benefit of the US importer, exporter and consumer. That's their mission, so I mean they could also. Here's some other things that they could do as corrective action. They could restrict the ability to file agreements with the FMC, which might include vessel sharing agreements those are the alliances that are out there. If somehow something's connected to one of the alliance members or to a country that's connected to an alliance member, it could have an impact there or service contracts that are anything that's kind of filed with the FMC.
Speaker 1:The FMC scope here of action is really significant. And look, while much of the industry's attention has been on tariffs and broader trade disputes, the investigation highlights a critical yet often overlooked factor in supply chain disruptions. Understanding these choke points in the FMC's role is essential essential for everybody, and I know that there's a lot going on here. But this investigation is a big deal and I can't say it enough. You don't want to find yourself in a position where the comments are due by May 13th If you have cargo that moves through these areas or if you have vessels that move through these areas and it's not necessarily only containerized cargo. There's a lot of indications in this investigation that talk about not just liner shipping, they talk about bulk. They talk about wanting to hear from bulk carriers and tramp operations and other areas of the supply chain that are not just the otherwise typical FMC liner shipping world. So take a look, this is important. There's six questions that are outlined on what the FMC is looking for, but really they just want to start that conversation. They want to have those conversations with anybody who uses these routes or could be impacted by these routes being taken advantage of or some sort of unfavorable shipping condition.
Speaker 1:All right, let's get into the meat and potatoes of the day and again. I could talk about Section 301 forever. I'm not going to. We're just going to do high-level topics today. Just want you to be briefed on what's happening, what happened this week and perhaps what's coming next.
Speaker 1:So I haven't talked much about the USTR 301 China shipbuilding hearings much. I did review it last spring I think it was oh gosh, a year now. But that was when there were two USTR investigations kind of happening at the same time. One that was potentially impacting cranes, ship-to-shore cranes. Remember there was a lot of talk about potentially having a 25% tariff associated with a ship-to-shore crane. That would have been for last year. And then there was also this second investigation that we were kind of paying attention to, but not significantly. I guess I would say we were paying attention to it, but it was based on the China shipbuilding and so it's this shipbuilding one that's the one that's being talked about today or this week.
Speaker 1:I want to give you an update on what's happening, particularly since it really dominated the maritime news this week. So Section 301 of the Trade Act of 1974, that's what we're talking about when we talk about USTR Section 301 investigations. It's this trade act. It's the section of the Trade Act of 1974 that empowers the United States Trade Representative, ustr, to investigate and respond to foreign countries' unfair trade practices. So it almost kind of feels similar to this FMC authority of the Foreign Shipping Practices Act and the Section 19 of the Merchant Marine Act of 1920, right there it's an unfavorable shipping condition, here it's an unfair trade practice, but in this case the focus is on China's actions in the maritime logistics and shipbuilding sectors. So it was initiated on March 12th, 2024.
Speaker 1:Again, like I said, we talked about it about a year ago. Petitioners filed a Section 301 petition and on April 17th the USTR initiated this investigation into China's acts, policies and practices targeting these sectors for dominance. What I want to highlight here is last year 2024, was a different administration. It doesn't really matter, other than this investigation is not necessarily a weaponization of this USTR. I've heard weaponization of agencies kind of all throughout and I don't want to get into the politics of any of this but the USTR, the Section 301, started and the investigation itself was determined under the Biden administration. And now here we are, a year later. It's that corrective action is what we're being, what we're talking about, that is happening under the Trump administration. So yeah, so March 12th was when it was filed.
Speaker 1:April 17th is when the actual investigation was initiated, the findings and I'm going to be reading right off of what USTR said in their hearing announcement actually, based on the information obtained during the investigation, ustr released a public report on the investigation. The report supports the determination that China's targeting of the maritime logistics and shipbuilding sectors for dominance is unreasonable and burdens or restricts US commerce and thus is actionable. So there we have it. They said look, we determined that it's unfair under the Section 301 threshold and therefore it's now actionable. Senate continues to say China's targeting of these sectors for dominance has undercut competition and taken market share with dramatic effect, raising China's shipbuilding market share from less than 5% of global tonnage in 1999 to over 50% in 2023, increasing China's ownership of the commercial world fleet to over 19% as of January 2024, and controlling production of 95% of shipping containers and 86% of the world's supply of intermodal chassis, among other components and products. And actually here's a little nod to the FMC. It was an FMC report done by then Commissioner Carl Bensel, who reviewed the production of the shipping containers and the world's supply of the intermodal chassis. He did a whole report so you can actually go look at that in more detail on what he found. But that was part of it, right, the 95% of shipping containers and 86% of the world's supply of intermodal chassis.
Speaker 1:So here's where it gets really contentious and here's where you got a lot of attention is that in February, so just last month the USTR proposed measures including imposing fees of up to $1.5 million on Chinese built or Chinese flagged ships entering US ports. So the Chinese built or Chinese flagged it's that Chinese built vessel itself, or on the, or having a Chinese built vessel in your fleet. And so there are some gray areas in the proposed actions. And I think that that's what part of this week was all about was trying to figure out the specificity that was required to either keep the proposed measures or perhaps pivot a little bit. So this week, the reason why this week was so big on this is because there were hearings scheduled and initially it was just supposed to be one day. It was going to be March 24th. It got extended to two days it was March 24th and 26th. I'm not exactly sure why they didn't have it on the 25th, why they had that pause.
Speaker 1:The other thing that's interesting and if you listen to Sal Mercogliano's, what's Going On With Shipping he is taking big issue with this, and rightfully so. But there were over 500 comments filed for this. It was over two days of testimony and there was not a video camera, a video feed or an audio feed coming out of it. And you know, it feels like things don't happen on accident and I don't know. I'm wondering if maybe there was no audio feed or no video feed because they wanted to provide some sort of cover, some sort of ability of the industry to chat amongst itself without that instant reaction from the rest of the world. I don't know, maybe, maybe I talked about this a little bit last week but maybe there was a purposeful intention to create a lot of noise around this hearing, to get some comments, to get some feedback to get some ideas flowing, and maybe that's why there's no audio, no video feed, but I'm not sure. But, sal, if you follow Sal, he has offered to have a puppet show, a sock puppet show, and I'm going to hold him to it. Sal, I would love to see a sock puppet show happen on your take once we get the transcript, because there will be a transcript coming out. I still haven't seen it. It hasn't been posted, that I know of, but we've been promised that there will be a transcript from the hearing. And once that's released, sal, do your AI magic. Create a script, and I'm sure you don't even use AI there. Create a script from the transcript, and I want to see the sock puppet show. But we'll see.
Speaker 1:So what are the implications for the maritime industry here? Look, china's dominance in shipbuilding really has grown significantly, of course, its share of global shipbuilding capacity increasing from 5% to over 50% in 2023. The US now ranks, I mean, pretty low right. 19th, I think, is where I've seen building fewer than five ships annually, depending on what criteria you're kind of looking at. Look, the proposed fees aim to counteract China's subsidies and support for its shipbuilding industry, potentially leveling right. The intention is to level the playing field for US shipbuilders. However, as we know, we're not able to build ships at a moment's notice.
Speaker 1:I think I mentioned last week that maybe this is an opportunity for spaceships to get involved and SpaceX can make ships go up, but if you tip them over and float them, can they be vessels? And so maybe this is an opportunity for some creative thinking. I guess is my point creative thinking in the shipbuilding world, where we have our traditional ships that take a while and the more we make, the better and faster we'll get at doing that when we move that direction. But perhaps there's some opportunities for cutting edge technology, new ideas in shipbuilding, really kind of breaking that mold of traditional thinking and kind of again going back to this new wave of critical thinking and creative ideas and having the opportunity and the space to have those crazy ideas and not necessarily crazy ideas, but these non-traditional ideas actually critically thought about to see if there's anything there that we can pull from. But look, obviously these measures could also lead to increased shipping costs and impact to global supply chains across the board.
Speaker 1:What we saw at TPM was MSC Sorentoff saying that if the proposed fee were to be implemented the way it is now. It's likely that a lot of the ocean carriers would then limit their calls to the US Because it's not clear if it's going to be a call, if it's going to be per call, per route, per voyage. Those are some of the things that hopefully this week were discussed and I know that some of the comments that were filed gave some alternative ideas to, even though the way that they were presented might be restrictive. Here's how we change it a little bit to be a little bit more beneficial over here. So these Section 301s, even though there's over 500 comments filed, take a look at them, scroll through, read through them.
Speaker 1:There's some really interesting arguments for the protest. Obviously, there's a lot of potential for disruption. That happens should these tariffs be implemented the way that they're being presented. Where it's 1.5 million, I mean even up to, I think, 3 to 3.5 million, it could potentially be 12 million, I mean depending on how many calls and how it's assessed and kind of all of these questions on how this would actually work. But the other thing is there's a lot of suggestions throughout the comments and I think that those are really worthy of review and intention of notice, because that's maybe where we go as an industry, some of those good ideas that are coming from the.
Speaker 1:I don't like this. But here's another idea, and again that's what I mentioned from the APA Legislative Summit. There was this feeling that from Kellyanne Conway's remarks, that the administration wants ideas on how to make things better. If you don't like the way things are going, maybe there's an opportunity to have those conversations and really engage and find good ideas being pushed forward. So, despite the 301 hearings this week, I'm going to go back to the FMC side for a minute here.
Speaker 1:I implore you to take some time with that FMC investigation. This is a giant deal that everybody seems to be not having the capacity to take a look at. This will impact the entire supply chain if the FMC finds unfavorable shipping conditions and ultimately the intention is to make these choke points more fair, more efficient, remove any opportunity for wrongdoing. I guess is kind of the assumption or the connotation here. But look. Comments closed, may 13th.
Speaker 1:What I don't want is for everybody to wake up in June when the FMC perhaps if they move that quickly and start levying corrective action say whoa, whoa, whoa. Did the FMC even have authority here? What did they do? Now is the time to pay attention to this investigation. It's a relatively short document of the investigation. These authorities that they have are different than we've ever seen in the FMC world, but they've always been there. They've been there for quite some time now. It's just that they've been lightly used and so now we're seeing a kind of more complete investigation in seven checkpoints checkpoints and perhaps others if they rise to that occasion. So I'll keep watching it all. I'll keep watching it all. That's it for this week. Keep it here for all the updates on what you need to know on the global supply chain.
Speaker 1:As always, can't say it enough the guidance here is general for educational purposes. It should not be considered to be legal advice directly related to your matter. If you need an attorney, contact an attorney, but if you do have specific legal questions, feel free to reach out to me at my legal company, skoll Strategies. Otherwise, for the non-legal questions, the e-learning, the general industry information and insights, the corporate trainings, the e-courses, the live webinars, come find me at the Maritime Professor. If you like these videos, let me know, comment, like and share. If you want to listen to these episodes on demand, or if you missed any previous episodes, check out my podcast by Land and by Sea. If you prefer to see the video they live, my YouTube page by Land and by Sea, presented by the Maritime Professor. While you're at it, check out the website themaritimeprofessorcom. Until next week. This is Lauren Began, the Maritime Professor and you've just listened to by Land and by Sea. See you next time. You.