Category: Government/Legislation

The FMC Announces Investigation into Flags of Convenience and Unfavorable Conditions Created by Flagging Practices

Matthew J. Thomas, Jeanne M. Grasso, Kierstan L. Carlson, Natalie M. Radabaugh ●

The U.S. Federal Maritime Commission (“FMC”) announced on May 21, 2025 that it is initiating a non-adjudicatory investigation into whether the: 1) vessel flagging laws, regulations, and/or practices of certain foreign governments, including the so-called flags of convenience, or 2) competitive methods employed by owners, operators, agents, or masters of foreign-flag vessels, are creating unfavorable shipping conditions in the foreign trade of the United States.

The investigation includes a 90-day public comment period, which ends on August 20, 2025. 

FMC’s “Section 19” Trade Authority

Section 19 of the Merchant Marine Act of 1920, 46 U.S.C. § 42101 et seq., authorizes the FMC to evaluate conditions that affect shipping in the U.S. foreign trade and to issue regulations or take action to address such conditions. Potential remedies include port fees up to one million dollars, limits on voyages to and from U.S. ports or the amount or type of cargo carried, and other trade restrictions.

The FMC exercised this authority frequently in the 1980s and 90s (before the sell-off of the major U.S. liner operators to foreign buyers) to force market-opening concessions and eliminate discriminatory fees and trade barriers that impeded U.S. shipping companies’ competitiveness overseas. However, these powers have been left nearly dormant for the past two decades.

The current investigation does not target particular flag States or propose any remedial measures; rather, it is a non-adjudicatory investigation pursuant to 46 C.F.R. Part 502, Subpart R, which allows the FMC to request information, conduct hearings, issue subpoenas, conduct depositions, and issue reports, at its discretion.

To read or download the full client alert, please visit our website.

The SHIPS Act: The Advent of a New U.S. Merchant Marine Fleet?

Keith B. Letourneau ●

In December 2024, Senator Scott Kelly (D. AZ), Representative Todd Young (R. IN), and then Representative Mike Waltz (R. FL) (now the President’s National Security Advisor) co-sponsored a bill to revamp shipbuilding in the United States. Titled the Shipbuilding and Harbor Infrastructure for Prosperity and Security (“SHIPS”) Act, the bill did not pass in the 118th Congress, but every expectation is that it will be introduced again in 2025. In that event and should Congress enact it, the SHIPS Act will fundamentally transform shipbuilding in the United States.

At one point during World War II, the United States’ capacity to build ships was truly phenomenal. The Liberty ship SS ROBERT E. PEARY was built in four days, 15 hours, and 29 minutes. Three new Liberty ships were launched every day in 1943; over 2,700 were built during the War, in addition to over 9,000 naval vessels. By contrast, in 2022, the United States built five merchant ships, and in 2024, commissioned two U.S. Navy ships. Currently, there are only about 90 U.S. flag vessels participating in international commerce, which is supported by a global fleet of more than 110,000 merchant ships.

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New USTR Measures Target Chinese Maritime Sector: What You Need to Know

Matthew J. Thomas, Kathleen H. Shannon, Keith B. Letourneau, Douglas J. Shoemaker, Natalie M. Radabaugh, and Holli B. Packer ●

The Office of the United States Trade Representative (“USTR”) issued a detailed notice on April 17, 2025, regarding actions and proposed actions in response to China’s alleged targeting of the maritime, logistics, and shipbuilding sectors for dominance. The measures, USTR argues, will “disincentivize the use of Chinese shipping and Chinese-built ships, thereby providing leverage on China to change its acts, policies, and practices, and send a critically needed demand signal for U.S.-built ships.” Below, we break down the key elements of the notice and their potential impacts. 

Background

The USTR launched an investigation under Section 301 of the Trade Act of 1974 (“Trade Act”) following a petition received by five national labor unions on March 12, 2024. The petition alleged that China’s policies unfairly harm U.S. commerce by targeting dominance in critical maritime-related sectors. Following a review, USTR determined that these practices displace foreign firms, reduce opportunities for U.S. businesses, and weaken supply chain resilience due to dependencies on China’s controlled sectors. As a result, in the closing days of the Biden administration, USTR issued a determination that these actions are unreasonable and actionable under the Trade Act.

The investigation revealed that China’s dominance strategy restricts U.S. competition, undermines supply chain security, and creates vulnerabilities in critical economic sectors. In response, on February 21, 2025, the USTR issued a Federal Register notice proposing certain responsive actions, including service fees and restrictions on certain maritime transport services, which resulted in the USTR convening a two-day public hearing and receiving nearly 600 public comments from industry stakeholders. USTR published its determination on responsive actions on April 17, 2025, Notice of Action and Proposed Action in Section 301 Investigation of China’s Targeting the Maritime, Logistics, and Shipbuilding Sectors for Dominance, Request for Comments. 

To read or download the full client alert, please visit our website.

Navigating the New Tariff Terrain: How Trump’s Latest Policies Impact Global Trade and Shipping

Matthew J. Thomas, Keith B. Letourneau, Douglas J. Shoemaker, and Holli B. Packer ●

President Donald Trump issued an Executive Order (“EO”) on April 2, 2025, titled Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits. This EO introduces significant changes to the tariff landscape, imposing unprecedented tariff increases on most U.S. trading partners, which will have far-reaching implications for global trade and shipping. Below, we break down the key elements of the new tariff policies and their potential impacts. 

Key Elements of the Executive Order

Global Tariff Implementation. The EO imposes a 10 percent global tariff on all imports into the United States, which became effective on April 5, 2025. For 57 countries identified in Annex I of the EO, an additional increase in tariffs for these countries was initially scheduled to take effect April 9, 2025, and has since been put on pause as negotiations take place, but that pause will not apply to sector tariffs. For additional information on the impact of the new tariffs announced in the April 2, 2025, EO, check out Blank Rome’s Recent Alert: Liberation Day: President Trump Unveils Global, Reciprocal Tariffs – What You Need to Know.

Product Exemptions. Annex II of the EO outlines various tariff exemptions, including certain mineral commodities, petroleum products, and pharmaceuticals. Among others, it also exempts items subject to Section 232 tariffs of the Trade Expansion Act of 1962, including automobiles and automobile parts, and steel and aluminum goods, from both the global tariff and increased reciprocal tariffs. Goods from Canada and Mexico that meet the United States-Mexico-Canada Agreement (“USMCA”) requirements are also excluded from these tariffs. However, imports that fail to qualify for duty-free treatment under USMCA remain subject to the 25 percent tariffs introduced in March 2025 (10 percent for energy and potash) under the International Emergency Economic Powers Act (“IEEPA”).

End of De Minimis Exemption and Chinese Tariffs Generally. The EO ends the de minimis exemption for goods valued at less than $800 from China and Hong Kong, effective May 2, 2025. Following administration’s latest announcement on April 9, 2025, tariffs imposed on Chinese goods surged to 145 percent. (Click here for President Trump’s April 2 amendment to the de minimis EO on China.) China has responded with a 125 percent tariff on U.S. goods.

To read or download the full client alert, please visit our website.

USTR Seeks Public Comment on Proposed Action in Section 301 Investigation of China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors

Matthew J. Thomas, Kathleen H. Shannon, and Natalie M. Radabaugh ●


The Office of the United States Trade Representative (“USTR”) announced its proposed actions under Section 301 of the Trade Act of 1974 (“Section 301”), in connection with its Investigation of China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance (the “Proposed Action”) on February 21, 2025. 

In short, the Proposed Action includes a variety of recommended remedies, including (1) imposing significant port fees on Chinese vessel operators and other operators of Chinese-built vessels, and operators with orders for new vessels being built in Chinese yards, and (2) implementing requirements for mandatory use of U.S.-flag and U.S.-built vessels to carry fixed percentages (increased annually) of U.S. exports. 

At this time, the Proposed Action is not final and USTR is seeking public comment by March 24, 2025, as discussed further below. Given the role that ocean transportation plays in the economy, the Proposed Action would have far-reaching effects to the extent it is adopted. Accordingly, vessel owners and operators and other interested parties in the industry should consider commenting on the Proposed Action and/or appearing at the upcoming hearing with respect to how the Proposed Action may affect them and their industry. In addition, at a minimum, shipowners, operators, charterers, and shippers should start considering their operations, contracts, and how the Proposed Action may affect them. 

To read or download the full client alert, please visit our website.

Will Jones Act Waivers Be a Viable Option in the Future?

Dana S. Merkel, Jonathan K. Waldron, and Jeanne M. Grasso


Companies often ask if it is possible to obtain a Jones Act waiver in emergency circumstances or otherwise when they know that there may not be domestic Jones Act vessels available to perform the transportation or installation of cargo. Historically, waivers have been very difficult to obtain and recent Congressional developments will make them even more difficult to obtain.

Background

The Jones Act prohibits the “transportation of merchandise by water, or by land and water, between points in the United States . . . either directly or via a foreign port” unless the vessel is U.S. built, U.S.-flag, and 75 percent U.S. owned. Jones Act requirements can only be waived if “necessary in the interest of national defense.” 46 U.S.C. § 501 (the “Waiver Provision”).

It is extremely difficult and rare to obtain a waiver of the Jones Act. The Waiver Provision has always limited waivers to situations where such waiver is needed for national defense purposes.

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A Practical Approach to Reduce MARPOL Enforcement Risks in the United States

Kierstan L. Carlson and Jeanne M. Grasso


Readers of Mainbrace know well that the United States has been aggressively enforcing compliance with MARPOL for decades. Often referred to as “magic pipe” cases, the U.S. Department of Justice (“DOJ”) has brought criminal MARPOL prosecutions against owners and operators of ships running the gamut from fishing vessels to bulkers, tankers, container ships, and cruise ships. These prosecutions have involved underlying violations of MARPOL Annex I (oil), but also Annex V (garbage) and more recently Annex VI (air emissions).

Criminal MARPOL cases are extraordinarily costly and disruptive to vessel owners/operators. Not only are significant fines levied against violators, but companies convicted of MARPOL violations suffer attendant reputational damage that can impact charter hire prospects and incur significant costs for paying wages, housing, and per diem to the crew members whom the government requires to remain in the United States for the duration of the criminal case. On top of that are the costs associated with a comprehensive Environmental Compliance Plan for the fleet, along with costs associated with a Third-Party Auditor and a Court-Appointed Monitor.

Unlike other areas of U.S. criminal enforcement, MARPOL prosecutions have continued at a steady pace, across administrations led by different political parties. This is due, in part, to the fact that the Act to Prevent Pollution from Ships (“APPS”), the U.S. statute that implemented MARPOL, is enforced by the U.S. Coast Guard (“USCG”), which is typically less affected by political change than other executive agencies responsible for criminal enforcement. Perhaps more importantly, APPS includes a whistleblower provision pursuant to which anyone who provides information to the USCG that leads to a conviction may be awarded up to 50 percent of the criminal penalty imposed under APPS. Potential awards incentivize seafarers to report misconduct to the USCG instead of to the company, even in cases where there is an open-reporting program. It also gives the USCG and DOJ a significant advantage, as they often receive photos and videos of the alleged improper conduct before their investigation even begins.

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Offshore Wind Development Is Coming to the Gulf of Mexico

Joan M. Bondareff and Keith B. Letourneau

Joan M. Bondareff

The U.S. Department of the Interior’s Bureau of Ocean Energy Management (“BOEM”) has identified two Wind Energy Areas (“WEAs”) in the Gulf of Mexico (“GoM”) to develop offshore wind farms. A lease sale is expected later this summer. One 546,000-acre WEA is located south of Galveston, Texas; the other is a 188,000-acre tract off the coast of Lake Charles, Louisiana. According to BOEM, the two WEAs have the potential to power 2.3 million and 799,000 homes, respectively, with clean energy generated by continuously renewable offshore wind.

Offshore wind promises various advantages over onshore wind farms, including stronger, more consistent, and less turbulent winds, and the use of substantially bigger towers and blades than onshore farms, resulting in more efficient and greater power generation; out-of-sight-and-sound facilities; the capacity to service large U.S. coastal populations; and the ability to avoid ecologically sensitive sites ashore. (See Onshore vs offshore wind energy: what’s the difference?) Moreover, according to some estimates, the GoM possesses the potential to generate almost 510 giga watts (“GW”) of offshore wind (“OSW”) annually. (See The Gulf of Mexico is poised for a wind energy boom. ‘The only question is when.’) Additionally, given the mature oil and gas offshore infrastructure along and off the Gulf Coast states, that infrastructure arguably can and would adapt to build and maintain OSW farms in the GoM.

This article reviews the next steps in the development of wind farms in the GoM, comparing the environments in other parts of the country with those in the Gulf region and describing the obstacles to actual production of offshore wind in the GoM.

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Transfer of Offshore Wind Safety and Environmental Responsibilities

Dana S. Merkel and Jonathan K. Waldron

The Department of the Interior (“DOI”) transferred safety and environmental oversight for the Outer Continental Shelf (“OCS”) renewable energy program from the Bureau of Ocean Energy Management (“BOEM”) to the Bureau of Safety and Environmental Enforcement (“BSEE”) on January 31, 2023. Importantly, the transfer does not affect current regulatory requirements for offshore wind development, but merely the agency responsible for oversight and enforcement.

Background

A number of reorganizations have occurred over the years since the Energy Policy Act of 2005 authorized the Secretary of Interior to grant OCS leases for renewable energy activities. When the Minerals Management Service was divided in 2011 following the Deepwater Horizon incident, the Secretary of Interior highlighted the importance of separating the lease planning and management functions and safety and environmental enforcement functions into two separate entities, creating BOEM and BSEE, respectively. A third entity was also created to manage the royalty and revenue management functions.

The renewable energy program, however, remained with BOEM entirely as the program was still in early development. It was noted that the renewable energy program would be split between the entities when it is determined that “an increase in activity justifies transferring the inspection and enforcement functions” to BSEE.

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Compliance, Enforcement Risks, and Emerging Issues Regarding EPA’s Vessel General Permit

Jeanne M. Grasso and Dana S. Merkel

About a year ago, we wrote about a rise in enforcement of the U.S. Environmental Protection Agency’s (“EPA”) Vessel General Permit (“VGP”). In the words of one EPA attorney, that was “just the beginning” and we have continued to see more aggressive reviews of VGP compliance and penalty demands, particularly on the U.S. West Coast. Since then, EPA has continued demanding significant penalties for alleged violations, sometimes citing interpretations of the VGP that are not outlined in any guidance documents. Additionally, in January 2023, EPA published an Enforcement Alert, EPA Reminder About Clean Water Act Vessel General Permit Requirements, reminding the maritime industry of the VGP requirements and impacts of non-compliance, and citing recent enforcement examples.

The VGP and VIDA Implementation

The VGP was issued under the Clean Water Act’s (“CWA”) National Pollutant Discharge Elimination System (“NPDES”) program and provides permit coverage nationwide for discharges incidental to the normal operation of commercial vessels more than 79 feet in length. EPA issued the first version of the VGP in 2008 and then another, more stringent version in 2013. The VGP set effluent limits and mandated Best Management Practices to control certain types of incidental discharges. It also required vessels to conduct routine and annual inspections and imposed numerous recordkeeping obligations, as well as monitoring and reporting requirements.

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