The U.S. is considering maritime trade sanctions to counter Chinese and bolster American shipping that would negatively impact the more than 200 annual foreign-flag ship calls for cargo transactions, compromise the supply chain and increase inflation in Hawaii.

The underlying national security issue is the global reach of China’s maritime industry that could obstruct U.S. logistics in a crisis.

China dominates the world’s construction of large oceangoing merchant ships: e.g., in 2024 China garnered 74.1% of new building contracts and delivered 55.7% of all new ships globally. China also dominates the manufacture of intermodal ocean shipping containers with a 95% market share and container road chassis with an 86% share globally. Chinese firms control marine terminal assets in 96 ports in 53 countries outside of China, and operate about 20% of the world’s commercial shipping fleet.

There are two sanction approaches. The U.S. International Trade Representative (USTR) found China is unlawfully attempting to dominate the international maritime industry and proposes countervailing fees and mandates. The new U.S. Commerce secretary proposes a “freight tax” on all foreign flag ships calling in the U.S.

The USTR investigation began under the Biden administration on April 7, 2024, in response to a March 12 petition from five maritime unions. Its report, “China’s targeting the maritime, logistics, and shipbuilding sectors for dominance is actionable under Section 301 of the Trade Act of 1974,” was issued Jan. 16, 2025. President Trump, inaugurated on Jan. 20, continued the USTR action, issuing on Feb. 21 a notice of public hearing on the matter scheduled in Washington, D.C., for March 24.

The USTR’s proposed sanctions parallel a half-dozen dead pieces of legislation introduced over the past decade, including the most recent SHIPS for America Act of 2024, and focus on shipbuilding as follows:

CUSTOMS “SERVICE FEES” ASSESSED ON EACH FOREIGN VESSEL ARRIVAL:

>> Chinese-flag or -operated vessel up to $1 million.

>> Chinese-built vessel not Chinese-flag, -owned or -operated up to $1.5 million.

MANDATES AS “CARGO RESERVATION” ON EXPORTS:

>> An escalating requirement that export cargoes be carried on U.S.-built U.S.-flag ships beginning with 1% of the cargo volume in the first and 15% by the seventh year.

Trump’s commerce secretary, Howard Lutnick, disclosed the other approach during an interview with Fox News’ Jesse Waters on Feb. 19. Lutnick complained about “tax scams” including the evasion of U.S. taxation by foreign- flag ships engaged in the U.S. foreign trade. Lutnick’s remedy is a freight tax, which is currently imposed on foreign shipping calling on several countries primarily in Africa, Asia and Latin America.

Lutnick justifies a freight tax on foreign shipping, which carries more than 98% of the U.S. foreign trade, to remedy their tax-exempt status. Whereas, if the U.S. foreign trade were carried by U.S. ships, those businesses and their employees would pay U.S. taxes. It’s also intended to privilege U.S.-flag ocean carriers so they might increase their share of the U.S. foreign trade.

To address recent misconceptions and elucidate the issues:

>> Matson Navigation and Pasha Hawaii dominate the domestic Hawaii ocean common carrier trade in container and vehicle cargoes, but actually a far greater volume of bulk cargo is imported by foreign-flag ships as contract carriers.

>> The Hawaii Organic Act of 1900 first applied to the coastwise laws to the islands. It’s the body of domestic shipping laws that includes, and in 1900 contained virtually all the cabotage requirements of, the 1920 Jones Act.

In short, decisions after Monday’s public hearing on the proposed freight tax on all foreign flag ships calling in the U.S. will have resonance for national shipping — and likely negative impacts on Hawaii’s already high costs of living.

Michael N. Hansen is president of the Hawaii Shippers’ Council representing merchant cargo owners and an independent consultant on maritime business.