The petition concerns the acts, policies and practices of Beijing to dominate the
maritime, logistics and shipbuilding shipping sector
On April 17, local time, the Office of the U.S. Trade Representative announced the launch of a 301 investigation against China's maritime, logistics and shipbuilding industries.
"On March 12, 2024, five labor unions filed a Section 301 petition regarding the acts, policies, and practices of China to dominate the maritime, logistics, and shipbuilding sector. The petition was filed pursuant to section 302 of the Trade Act of 1974, as amended (Trade Act) (19 U.S.C. 2412, requesting action pursuant to Section 301(19 U.S.C. 2411)."
PETITION FOR RELIEF UNDER SECTION 301 OF THE TRADE ACT OF 1974, AS AMENDED CHINA’S POLICIES IN THE MARITIME, LOGISTICS, AND SHIPBUILDING SECTOR - Section 301 Investigations: https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-china-targeting-maritime-logistics-and-shipbuilding-sectors-dominance
What Happened
Let's start with a general overview of what happened, based on the official notification from the Office of the U.S. Trade Representative.
Official notification from the Office of the United States Trade Representative
On March 12, local time, five major unions, including the United Steelworkers (USW), filed a petition asking the Biden administration to launch a trade investigation into China's "unreasonable and discriminatory" practices in the maritime, logistics and shipbuilding sectors.
The Office of the U.S. Trade Representative (USTR) announced April 17 that it had agreed to launch an investigation, based on Section 301 of the U.S. Trade Act of 1974 (hereafter "Section 301"), which authorizes the U.S. Trade Representative to initiate investigations into so-called "unreasonable or unfair trade practices" of other countries and to initiate investigations into "unreasonable and discriminatory trade practices" of other countries.
"Initiate an investigation, and it may be recommended to the President of the United States to implement unilateral sanctions after the investigation is over."
The investigation will be conducted through a public comment period and a hearing: the public can submit written briefs and comments on the website designated by the Office of the U.S. Trade Representative until May 22; a hearing will be held at the U.S. International Trade Commission headquarters in Washington on May 29.
The whole affair could be analogous to a court case:
Five major U.S. labor unions (plaintiffs) have filed a petition (complaint) with the Office of the U.S. Trade Representative (Tribunal) against China (defendant) for "unreasonable and discriminatory practices in the maritime, logistics, and shipbuilding sectors" (violations) that have caused harm to affected U.S. industries (plaintiffs and the other victims), asking the Office of the U.S. Trade Representative (Tribunal) to initiate proceedings against China (defendant) and impose sanctions and damages on China (the defendant).
The Office of the U.S. Trade Representative (the Tribunal) has announced that it has accepted the case to initiate an investigation into whether China (the respondent) actually violated Section 301. The procedure for the investigation and hearing requires all interested parties to submit evidence to the Office of the U.S. Trade Representative (the Tribunal) by May 22; the hearing (trial) is scheduled for May 29, after which decisions will be announced.
The "Petition"
To understand the "facts of the case," it is necessary to read the "indictment." Therefore, it is necessary to examine the contents of the petition submitted by the five major labor unions to gain a basic understanding of the initiation of the investigation.
PETITION FOR RELIEF UNDER SECTION 301 OF THE TRADE ACT OF 1974, AS AMENDED CHINA’S POLICIES IN THE MARITIME, LOGISTICS, AND SHIPBUILDING SECTOR:
The entire petition is more than 100 pages long and is divided into five parts:
INTRODUCTION;
CHINA’S ACTS, POLICIES, AND PRACTICES IN THE MARITIME, LOGISTICS, AND SHIPBUILDING SECTOR;
CHINA’S SHIPBUILDING POLICIES BURDEN AND RESTRICT U.S. COMMERCE;
REMEDIES REQUESTED;
CONCLUSION.
The first part introduces some basic information and presents two points of interest.
The first is that the Big Five argued that the U.S. did not purchase and import Chinese-made ships, so traditional trade measures were unable to address China's "unfair" trade practices, and that Section 301 gives the U.S. Trade Representative the power to impose taxes and restrictions. The petition also mentions that the U.S. Congress has the power to impose taxes and restrictions.
The petition also states that the U.S. Congress has clearly recognized that providing support for the construction of foreign ships used for international commercial shipping imposes burdens and restrictions on U.S. commerce. Therefore, China's conduct is subject to Section 301 sanctions.
"Section 301 provides an appropriate mechanism for addressing China’s policies in the maritime, logistics, and shipbuilding sector. First, traditional trade remedies are not available to address China’s unfair trade practices in this area, as the vast majority of ships produced in China are used in international commerce, and never imported into the United States. Second, the statute gives the United States Trade Representative (“USTR”) the power not only to impose tariffs, but also to impose fees and other restrictions, as well as take all other appropriate and feasible action within the power of the President. Third, Congress explicitly recognized that, by definition, support for the construction of foreign vessels used in international trade burdens or restricts U.S. commerce and thus is a proper target for action under Section 301.
For all of these reasons, USTR should take all appropriate and feasible action to obtain the elimination of China’s practices. That action should include the assessment of a port fee on Chinese-built ships that dock at a U.S. port, the creation of a Shipbuilding Revitalization Fund to help the domestic industry and its workers compete, and other measures to stimulate demand for, and the capacity to construct, commercial vessels built in the United States. The commercial shipbuilding and repair industry in the United States can compete and grow if the massive market distortions that the Government of China has created are remedied. The restoration of America’s commercial shipbuilding industrial base will create high-skilled jobs, drive demand for key upstream technologies and inputs, and ensure a sufficient domestic fleet to safeguard national security. Section 301 is the right tool at the right time to counteract China’s predatory and destructive practices, rebuild a vibrant domestic shipbuilding industry and supplier base, and protect America’s economic and national security for years to come."
The second noteworthy point is that this section lists some information about the five major U.S. labor organizations that participated in the petition:
United Steelworkers of America (USW), representing more than 850,000 people;
International Association of Machinists and Aerospace Workers of America (IAM), representing thousands of people;
International Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmiths, Forgers & Helpers (IBB), with representation not mentioned;
International Brotherhood of Electrical Workers (IBEW), representing 820,000 people;
the Maritime Trade Department (MTD) of the AFL-CIO, representing nearly 2 million people.
These five major unions are representative of U.S. shipyard operators and related ancillary industries.
"The USW, IAM, IBB, IBEW, and MTD are interested parties within the meaning of the statute and regulations because they have significant interests affected by China’s unreasonable and discriminatory policies that burden or restrict U.S. commerce in the maritime, logistics, and shipbuilding sector.
The statute states that the term “interested persons,” includes, but is not limited to, domestic workers “that may be affected by actions taken under” Section 301 of the Trade Act of 1974, as amended (“Section 301”).3 USTR’s regulations further define an interested person as any party who “has a significant interest affected by the act, policy or practice complained of” in a petition, including a “union or group of workers which isrepresentative of an industry” that produces in the United States a product affected by the act, policy, or practice complained of.4
The USW, IAM, IBB, IBEW, and MTD are interested persons whose significant interests are affected by China’s policies on shipbuilding and related maritime industries. As described in more detail below, China’s policies have taken global market share from domestic shipbuilders, depressed global prices for vessels, and discriminated against ships and related upstream technologies produced in the United States, thus preventing the domestic shipbuilding industry and its upstream suppliers from maintaining needed production and jobs here in the United States. China’s drive to dominate global maritime and logistics trade have also resulted in the country becoming a key player in logistics and port infrastructure. Through these policies, the Government of China is developing the ability to assess international shipping activities of its commercial rivals, monopolize cargo intelligence, access the systems controlling customs information for global maritime trade, and potentially disrupt port operations. This network of ships, shipping companies, ports, and logistics systems supported and controlled by the Government of China threatens to impair free and open maritime trade and puts key supply chains and national security priorities at risk."
The second part of the petition lists some of China's policies and behaviors in the maritime, logistics and shipbuilding sectors.
The five major labor organizations believe that China has implemented a number of unreasonable and discriminatory policies that provide Chinese companies with an unfair advantage in industries such as shipbuilding, shipping, and marine equipment.
Specific behaviors include:
Implemented industrial planning and policies aimed at unfairly gaining market share and distorting global markets for the benefit of Chinese firms;
Dominate non-competitive mergers and business activities;
Provide non-market friendly competitive advantages for Chinese companies to dominate key upstream inputs and technologies;
Provided favorable financing mechanisms for Chinese industry;
Creating and using a network of upstream suppliers, foreign ports and terminals, carriers, and suppliers of logistics equipment and software to obtain information;
Theft of intellectual property and industrial espionage;
Controlling shipping lines' freight rates and capacity allocation.
In this section, the petition not only lists in detail more than a dozen regulations promulgated and implemented by the Chinese government at the national level in the areas of industrial planning, capital, finance and technology, but also mentions supporting policies at the provincial and municipal levels, such as Shanghai, Jiangsu and Shandong.
In addition, the petition talks in great detail about the financial activities of some Chinese financial institutions in the shipbuilding sector, specifying the names of the financial institutions, the financing period, and the amount involved. The financial institutions mentioned, in addition to the four major Chinese banks, China National Agricultural, Industrial and Construction Bank, also include Export-Import Bank of China, China Development Bank, China Merchants Bank, CITIC Bank, Bank of Communications, Industrial Bank, and China Export and Credit Insurance Corporation, etc.
"V. CONCLUSION
For more than 20 years, the Government of China has poured billions upon billions of dollars into its shipbuilding industry, with the explicit goal of becoming the world’s largest shipbuilding nation. China has achieved that goal, and it now makes nearly half the world’s ships. In addition, China has given its domestic shipbuilding industry unfair advantages by requiring state-owned steel producers to provide plate to shipbuilders at below-market rates, mandating the purchase and use of Chinese ships, supporting domestic mergers and disapproving alliances by foreign competitors, and providing many other forms of support. These policies are just one part of China’s much more ambitious goal of being a major maritime power by promoting state-owned shipping, port infrastructure, and logistics companies, investing in strategically located foreign ports and terminals, and promoting a government-supported logistics platform.
These acts, policies, and practices are unreasonable, unfair, inequitable, and discriminatory, and they have burdened and restricted U.S. commerce by supporting the construction of vessels used in commercial transport of goods between the U.S. and foreign countries, depressing domestic production and employment in the shipbuilding industry, and threatening American economic and national security. For all of these reasons, the U.S. Trade Representative should exercise its discretion to take all appropriate and feasible action to obtain the elimination of China’s practices. That action should include the assessment of a port fee on Chinese-built ships that dock at the United States, the creation of a Shipbuilding Revitalization Fund to help the domestic industry and its workers to compete, and other measures to stimulate demand for commercial vessels built in the United States.
The commercial shipbuilding industry in the United States simply cannot compete unless the massive market distortions that the Government of China has created are remedied and the injury that has been inflicted addressed. The very reason that Section 301 exists is to empower the Administration to respond to such predatory and destructive foreign government practices, and to support domestic industries and workers harmed by these acts. We look forward to working with the Administration to stand up to China’s harmful policies and support a vibrant domestic shipbuilding industry."
You can read the original documents and download them from here:
Initiation of Section 301 Investigation: China’s Acts, Policies, and Practices Targeting the Maritime, Logistics, and Shipbuilding Sectors for Dominance – April 17, 2024
Petition – March 12, 2024
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