US Tariffs Create Uncertainty in Ship Leasing and Financing
Posted on May 17, 2025 at 09:05 AM
Leigh Hansson, a Global Regulatory Enforcement Partner at Reed Smith, analyses the increasing regulatory ambiguity confronting the international shipping sector as the United States contemplates a fresh round of tariffs aimed at Chinese-related goods and services.
Even in cases where ownership and control are commercially diverse, the U.S. Trade Representative's (USTR) most recent proposals have sparked worries that ships financed through Chinese leasing arrangements may be subject to additional port fees.
Regulatory Uncertainty & Strategic Aspects
The definition of “Chinese-owned” or “Chinese-controlled” under the new framework is one of the most important legal and operational issues currently facing the sector. Although some of the more aggressive provisions in the most recent USTR draft, which was released last week, have been loosened, the main risk remains: that vessels with connections to Chinese finance could be subject to tariffs.
In addition, owners involved in sale and leaseback agreements with Chinese financial institutions are especially vulnerable to this uncertainty. When a Greek shipowner leases a vessel from a
Chinese lessor, for instance, the vessel may be labelled as “Chinese-controlled” even though the technical management and commercial operations are managed in another country. In these situations, being subject to new port fees or tariffs may have significant negative effects on business.
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Estimating the Jurisdictional Scope & Enforcement Triggers
This uncertainty is causing a surge in risk analyses throughout the industry. As clients look to map their exposure before enforcement actions occur, we are witnessing an increase in activity at Reed Smith. In an effort to lower their possible liability, some are even thinking about reorganising their transactions.
Meanwhile, there is a growing need for contractual safeguards, modified insurance conditions, and more transparent disclosures regarding beneficial ownership and funding sources in order to provide flexibility in the event that tariffs are implemented. All clients want to protect their transactions from regulatory surprises in the future.
As of right now, the industry is functioning in a regulatory grey area, since there is no clear legal definition of “Chinese ownership.” If the proposed tariffs are implemented as anticipated, they may compel a global reassessment of vessel financing arrangements, particularly those involving Chinese leasing firms or financial institutions.
For shipowners, exercising caution is the best course of action in light of this uncertainty. Stakeholders should anticipate that any significant Chinese involvement in a vessel's ownership or
financing structure may be covered by the jurisdiction until regulators define the thresholds and enforcement triggers.
Ultimately, risk mitigation in this dynamic environment requires staying ahead of the regulatory curve through operational, financial, and legal planning.
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