May 13, 2024
Section 301 Investigation: China’s Maritime, Shipbuilding, and
Logistics Policies
On April 17, 2024, the Office of the United States Trade
being authorized to retaliate. (For more detail, see CRS In
Representative (USTR) announced that it had initiated a
Focus IF11346, Section 301 of the Trade Act of 1974.)
new investigation pursuant to Section 301 of the Trade Act
of 1974. This investigation focuses on the acts, policies, and
Section 301: Shipbuilding and Maritime
practices of the People’s Republic of China (PRC or China)
Transportation Subsidies
that USTR says seek to establish global dominance in the
In 1979, Congress amended Title III of the Trade Act of 1974
maritime, logistics, and shipbuilding sectors. USTR’s
and added a provision in response to growing concerns about
announcement follows its review, in consultation with the
the rapid and continued decline of the U.S. commercial
interagency Section 301 Committee, of a petition filed in
shipbuilding industry. In the Trade Agreements Act of 1979 (P.L.
March 2024 by labor unions requesting a Section 301
96-39), Congress provided explicitly that subsidies by foreign
investigation.
governments for the construction of oceangoing vessels used in
the commercial transportation of goods between the United
Some Members of Congress have expressed support for the
labor unions’ petition and USTR’s initiation of the Section
States and other countries were within the purview of Section
301. The amendment is codified at 19 U.S.C. §2411(d)(2).
301 investigation. More broadly, China’s drive to develop
an integrated global maritime supply chain and project its
maritime power globally has intensified debate among
The Petition and the Unions’ Allegations
some in Congress about the state of the U.S. commercial
The petition to initiate the current Section 301 investigation
shipbuilding industry. (For more detail, see CRS In Focus
was filed on March 12, 2024, by five major U.S. labor
IF12534, U.S. Commercial Shipbuilding in a Global
unions: (1) United Steel, Paper and Forestry, Rubber,
Context.) The debate also reflects growing congressional
Manufacturing, Energy, Allied Industrial and Service
concerns about whether the United States has sufficient
Workers International Union; (2) International Association
shipbuilding capability and capacity to address current and
of Machinists and Aerospace Workers; (3) International
emerging threats to U.S. economic and national security.
Brotherhood of Boilermakers, Iron Ship Builders,
What Is Section 301?
Blacksmiths, Forgers and Helpers; (4) International
Title III of the Trade Act of 1974 (Sections 301-310,
Brotherhood of Electrical Workers; and (5) Maritime
codified at 19 U.S.C. §§2411-2420) is collectively referred
Trades Department, AFL-CIO. The petition alleges that the
to as “Section 301.” It grants USTR a range of
PRC government, through nonmarket means, has “seized
responsibilities and authorities to investigate foreign trade
market share, suppressed prices, and created a worldwide
practices and impose trade sanctions on foreign countries
network of ports and logistics infrastructure that threaten[s]
found to violate U.S. trade agreements or engage in acts
to discriminate against U.S. ships and shipping companies,
that are “unjustifiable,” “unreasonable,” or “discriminatory”
disrupt supply chains and undermine vital [U.S.] national
security interests.”
and burden U.S. commerce. Prior to 1995, the United States

often used Section 301 to unilaterally pressure other
Specifically, the petition contends that China has pursued
countries to eliminate trade barriers and open their markets
the explicit goal of dominating the global shipbuilding,
to U.S. exports. The creation of an enforceable dispute
maritime, and logistics sectors and “has funneled hundreds
settlement mechanism in the World Trade Organization
of billions of dollars and adopted numerous supporting
(WTO), strongly supported by the United States at the time,
policies to achieve” it. The petition presents a number of
significantly reduced the use of Section 301. While the
“complaints” involving the PRC government, including (1)
United States retains the flexibility to seek recourse for
directed mergers and anticompetitive activities, (2)
foreign unfair trade practices at the WTO or under Section
intervention to support and grow the PRC shipbuilding
301 authorities, trading partners may challenge at the WTO
industry, (3) favorable treatment and preferences/mandates
a USTR determination to bypass WTO dispute settlement
for PRC-built ships, (4) policies targeting upstream inputs
procedures and unilaterally impose retaliatory measures in
and technologies, (5) state-backed intellectual property
response to a Section 301 investigation.
theft, and (6) controls on freight rates and cargo space
Between 2017 and 2020, USTR launched Section 301
allocations. These actions, the petitioners claim, are
“unreasonable, unfair, inequitable, and discriminatory”;
investigations against China, the European Union (EU),
France, a group of 10 trading partners, and Vietnam. Two
create global overcapacity in the shipbuilding sector; and
investigations resulted in USTR imposing tariffs: on U.S.
prevent the U.S. shipbuilding industry and its upstream
imports from China (2018) and the EU (2019). The U.S.
suppliers from maintaining needed production and jobs in
action against the EU, unlike that against China, was based
the United States. The petition also asserts that these actions
on the outcome of a WTO case in which USTR anticipated
have affected “significant interests” of the unions.
https://crsreports.congress.gov

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Section 301 Investigation: China’s Maritime, Shipbuilding, and Logistics Policies
To address these issues and concerns and thereby, the
USTR has requested consultations with the PRC
petition asserts, make it possible for the U.S. shipbuilding
government; is currently accepting public comments on the
industry to recover and operate sustainably, the petitioners
investigation through May 22, 2024; and has scheduled a
request that USTR (1) “impose a fee on every [PRC]-built
public hearing for May 29, 2024. The investigation may
vessel that docks at a [U.S.] port”; (2) establish “a
entail a detailed review of PRC government measures; their
shipbuilding revitalization fund with proceeds from the fee
impact on the U.S. economy, including on U.S. workers;
to support investments in the domestic shipbuilding
and legal analyses of the interplay between the measures
industry’s capacity, supply chains, and workforce”; (3) take
and legal standards set under Section 301. The agency may
actions to “support stronger demand for U.S.-built vessels
seek to address several issues, including the following:
in light of unfair competition from China” and “address
• What are the policies and practices of the PRC government with
China’s drive to dominate port and logistics infrastructure
respect to the maritime, logistics, and shipbuilding sectors?
platforms and equipment”; and (4) negotiate “with other
What efforts is China undertaking to dominate these sectors,
major shipbuilding countries to address any concerns about
including the upstream and downstream supply chain and
their own government support programs and coordinate
shipping services?
measures to address China’s unfair practices.”
• Are these PRC policies and practices unreasonable or
Some observers have questioned the unions’ claims and
discriminatory? Do they burden or restrict U.S. commerce? If
so, what is the nature and level of the burden or restriction on
expressed concern about the potential implications of
U.S. commerce (e.g., on any sector/industry or labor in the
implementing some these remedies, noting that it could
United States)?
trigger a spiral of increased protectionist measures by other
countries and adversely affect global economic growth and
• What other policies and practices relating to these sectors might
the rules-based trading system. Others also contend that
be included in this investigation or addressed through other
China’s subsidies have benefitted U.S. consumers of ships
applicable mechanisms?
and shipping services by keeping prices low.
• Is the PRC government’s conduct inconsistent with China’s
Next Steps
international commitments and obligations under the WTO or
other agreements? If so, should the United States invoke WTO
During the Section 301 investigation and prior to making a
dispute settlement procedures?
determination on whether to take action, USTR is required
• Are the applicable policies and practices of the PRC
to consult with the petitioner and seek advice from private
government actionable under Section 301? If so, what action, if
sector advisory representatives. The agency can—but is not
any, should the United States take to obtain their elimination?
required to—request the views of the U.S. International
Trade Commission (USITC) concerning the impact that a
Considerations for Congress
proposed retaliatory action could have on the U.S.
The use of Section 301 authorities does not require formal
economy. Doing so might help USTR avoid taking an
approval by Congress or an affirmative finding by an
action that could have negative effects on industries or
independent agency such as the USITC. As a result, the
sectors other than those petitioning for an investigation.
President has broad discretion in determining when and
how to act. Congress, however, could engage in oversight
Section 301 generally requires that investigations be
of the investigation through hearings with USTR and
concluded within 12 months. USTR has discretion to
stakeholders. Should Congress disagree with why or how
determine, after carrying out an investigation, whether
the investigation is being carried out or disapprove of the
action under Section 301 would be effective in addressing
President’s potential exercise of authorities under Section
the issues and concerns raised in the petition. Section 301
301, Members may also consider legislation to amend
authorizes the USTR to (1) impose duties or other import
Section 301 and the investigatory process.
restrictions, (2) withdraw or suspend trade agreement
concessions, or (3) enter into a binding agreement with the
A decision by USTR not to take action under Section 301
foreign government to either eliminate the conduct in
would not preclude other trade policy and economic tools to
question (or burden to U.S. commerce) or compensate the
try to address the matters raised by the labor unions or
United States with satisfactory trade benefits. The USTR
identified during the course of the investigation. Congress
may also restrict the terms and conditions or deny the
could engage with the Administration to assess the
issuance of any “service sector access authorization.”
economic and national security implications of China’s
Authorizations include licenses and permits that allow a
growing shipbuilding capabilities; develop legislation
foreign supplier of services access to the U.S. market. The
and/or administrative actions that would support and benefit
President is also authorized to take any action within his or
the U.S. shipbuilding industry (e.g., grants and tax
her power “with respect to trade in any goods or services, or
incentives); and examine the issues raised in the petition
with respect to any other area of pertinent relations with the
and consider any further actions that may be appropriate,
foreign country” to obtain the elimination of the policy or
including at the plurilateral and multilateral levels (e.g.,
practice under investigation.
OECD Council Working Party on Shipbuilding and WTO).
In evaluating policy options, Congress may consider
Should USTR determine that China’s conduct is actionable
potential impacts on the U.S. economy, U.S.-China
under Section 301 and take unilateral action in this case,
relations, and the rules-based multilateral trading system.
China could potentially pursue WTO dispute settlement or
retaliate by targeting U.S. exports or firms, as it did in
Andres B. Schwarzenberg, Specialist in International
response to prior Section 301 actions by USTR.
Trade and Finance
IF12666
https://crsreports.congress.gov

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Section 301 Investigation: China’s Maritime, Shipbuilding, and Logistics Policies


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https://crsreports.congress.gov | IF12666 · VERSION 1 · NEW

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