USTR Clause for Time Charter Parties 2025

Explanatory Notes

As part of the United States Trade Representative’s (USTR) “Section 301 Investigation of China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance,” the USTR announced actions to impose fees on Chinese-related ships calling at US ports.

This clause addresses fees incurred under Annexes I and II of the USTR Notice, specifically for vessels with a nexus to the People’s Republic of China in a time charter context.  This clause may be incorporated into new charterparties and into existing charterparties.

The clause stipulates that these fees are primarily the responsibility of charterers, except in certain circumstances outlined in subclause (c), where the fees may be split between owners and charterers, or in subclause (d), where the fees may be entirely the responsibility of the owners.

Recognising that owners are best positioned to verify whether a connection exists, subclause (a) obliges owners to declare, on charterers’ request, whether the vessel or its related entities are linked to the People’s Republic of China. This also avoids the need for owners to disclose personal details of individuals within their organisational structure.

At the time of drafting, the enabling provisions for these fees have yet to be published. Subclause (e) is drafted with the expectation that charterers will eventually be able to make direct payments of these fees to the relevant US agency. In the interim, recognising that only one party may be able to effect payment, the clause provides for prompt reimbursement by the responsible party as outlined in subclause (f).

Subclauses (g) and (h) specify remedies available against a party that fails to make prompt payment of the fees. These include obligations on the defaulting party to rectify the failure, and to bear and indemnify the non-defaulting party against all costs and losses arising from their default. The subclause does not include any termination rights, liens on cargo, or automatic off-hire events.  

Drafting Team

The BIMCO USTR Clause for Time Charter Parties 2025 is the result of a collaborative and consensual process between owners, charterers, P&I Clubs and other stakeholders. BIMCO is grateful to the drafting team for their considerable time, effort and commitment in producing this clause:

• Daniel Carr, Stolt-Nielsen
• Capt Lin Huoping, COSCO Shipping
• Daisy Kairis, Prominence Maritime
• Jens Erik Kundby Nielsen, Ultrabulk
• Shunsuke Takeshita, NYK Line
• Yannis Botonakis, Chartworld
• Ann Shazell, Cargill International
• Richard Reisert, ASBA
• Scott Pilkington, NorthStandard
• Matthew Thomas, Blank Rome (Washington)
• Alexander Brandt, Reed Smith (London)

BIMCO Secretariat:

• Stinne Taiger Ivø
• Carl Wilhelm Lindahl
• Indu Chitran
• Merete Greisen, BIMCO, Contractual Advice
• Lars Robert Pedersen, BIMCO, Regulatory Affairs
   

Explanatory Notes

These explanatory notes are intended to provide an insight into the thinking behind the BIMCO USTR Clause for Time Charter Parties 2025. They also explain how the clause is intended to operate and the allocation of responsibilities and costs between the parties. If you have any questions about the clause, please contact us at contracts@bimco.org and we will be happy to assist.

Key Features of the Clause

The clause responds to fees incurred under Annexes I and II of the USTR Notice, i.e., vessels with a nexus to the People’s Republic of China, in a time charter context. Annex III, which targets non-US car carriers, has been excluded due to its different scope.  

It is crucial for parties to discuss whether the vessel has a nexus to the People’s Republic of China during negotiations and to determine if Annexes I and II of the USTR Notice apply. The declaration requested under subclause (a) is intended to provide a snapshot of the vessel's status at the time of signing and should reflect information disclosed during negotiations.

The clause anticipates that, generally, charterers will bear the imposed fee. In assessing the potential fees the vessel will attract charterers will rely on declarations made under subclause (a), if requested. Where the actual fee imposed is greater than the fee reasonably anticipated under the declaration, and there is a causal link between the exceptions listed in subclauses (c)(ii) or (c)(iii) and the increased fees, the responsibility for the fee is split between charterers and owners with charterers being liable for the reasonably anticipated amount and owners liable for the additional exposure.  However, if the fees are incurred as a result of owners’ actions, such as owners’ breach of contractual obligations, an off-hire event specified in the contract, or owners' voyage orders, owners will bear full responsibility for the fees under subclause (d).

This clause does not give parties the right to terminate the contract, a right to exercise a lien on cargo, or to automatic off-hire. The relevant terms of the contract, if any, continue to govern these remedies.

Subclause (a)
The subcommittee understands that for the purposes of the USTR Notice, the term “Vessel Operator” does not have its plain English meaning.  At the time of drafting, the “Vessel Operator” is the party entered on CBP Form 1300 which in turn is presumed to be the party named on the vessel’s Certificate of Financial Responsibility. It is assumed that Owners are aware of the party named in the COFR.

Subclause (a) places an obligation on owners to declare, at charterers’ option, whether any entities associated with the vessel have a nexus with the People’s Republic of China in subclause (a)(i), or whether the vessel was built in China under subclause (a)(ii).  This approach acknowledges that owners are best placed to know and verify this information, while also avoiding the need for owners to disclose personal details of individuals in their organisational structure.  

The clause also requires owners to notify charterers of any changes in the information declared between the time of signing the contract and its conclusion.  This allows owners to utilise their asset as they see fit throughout the charter, while providing charterers with certainty on their exposure to such fees at the outset. 

While the place of build is generally a fixed fact, the subcommittee included it in owners’ continuing obligations because they understand that a major retrofit in the US or China might bring the vessel outside or within the scope of Annex II of the USTR Notice. Therefore, it is possible that the place of build, for USTR purposes, may change in the lifetime of a vessel. Hence, the extension of owners' obligation to notify charterers of any such change to information declared under subclause (a)(ii).

Subclause (b)
Under subclause (b), charterers are wholly responsible for all fees incurred as a result of the vessel calling into the US on charterers’ orders.  It is anticipated that in most instances, charterers will be responsible for fees incurred.  

Subclause (c)
Subclause (c) specifies the circumstances under which the burden to pay the fee shifts in part or in whole between owners and charterers. Charterers remain liable for the anticipated fee and, where the increment is a result of owners’ actions, the burden for the increment shifts to the owners, i.e., owners are liable for the uplift, the additional sum incurred.   

It is noteworthy, that by increment, the subcommittee anticipates the vessel’s movement between Annex I and II and not within the annex.

Under subclause (c)(i), owners will be liable for additional sums incurred as a result of owners’ inaccurate and/or incomplete or failure to provide the declaration requested under subclause (a).
 
Example A
At the time of signing the contract, charterers request owners to provide an undertaking under subclause (a) and owners fail to provide this declaration.  The responsibility to pay the fee shifts from charterers to owners.

Example B
At the time of signing the contract, charterers request owners to provide a declaration under subclause (a) and owners’ misdeclare leading charterers to wrongly assess whether the vessel will incur fees under Annexes I or II of the USTR Notice.

Where charterers relying on the declaration have reasonably anticipated that no fee will be incurred and a fee is in fact incurred under Annex I or II, owners are liable for the fee incurred in whole.

Where charterers relying on the declaration have reasonably anticipated that a fee under Annex II will be incurred but a fee under the more onerous Annex I is incurred, owners will be liable for the uplift incurred, i.e., the difference between the fee in Annex I and II. 

This clause does not anticipate owners to be liable for miscalculations within the respective annexes.

Under subclause (c)(ii) and (c)(iii), owners will be liable for fees incurred as a result of their changes to entities associated with the vessel subsequent to the declaration under subclause (a) notwithstanding that owners have notified charterers of such change under subclause (a).

The declaration at subclause (a) gives charterers an insight into whether Annexes I or II of the USTR apply. While the clause does not impose an obligation on owners to ensure that there are no changes to vessel’s nexus to the People’s Republic of China, should owners effect a change, owners are liable for the additional exposure incurred as a result. This approach allows owners to have flexibility to utilise their assets as they deem fit while providing charterers with certainty on their contractual obligations.  

Example C
At the time of signing, owners declare that the vessel has no connection with the People’s Republic of China under subclauses (a)(i) and (a)(ii). The vessel is not anticipated to attract any USTR fee when it calls into the US. During the period of charter, owners enter into a leaseback agreement with a Chinese entity. Owners notify charterers of this change.  Subsequently, during a call into the US, the vessel attracts fees under Annex II.  Owners are now liable for the fee in whole under subclause (c)(ii).

Subclause (d)
This subclause specifies circumstances where owners are wholly liable for the fees incurred.  Of crucial importance is causation.  Where the fee is incurred as a result of the specified list of circumstances, the responsibility for the fee lies with owners. 

Example D
The vessel is scheduled to call into the US on charterers’ orders and suffers a contractual off-hire event enroute.  The off-hire event is not causal to the call into the US.  In the event the call attracts a fee, charterers remain liable for the fee.

Example E
The vessel is not scheduled to call the US and suffers an engine breakdown enroute to destination.  Owners direct the vessel to call into the US as a port of refuge. Should this call be subject to a fee as the vessel calls into the US on owners’ orders, owners are liable for any fee imposed.  

Subclause (e)
This subclause obliges the responsible party (primarily charterers) to make prompt and direct payment to the relevant US agency.  

The subcommittee was cautious about setting a strict time frame for payment, as this may vary from case to case. It is anticipated that failure to make payment is likely to impact port clearance and the vessel’s schedule. Delay is the vessel’s schedule is neither in charterers nor owners’ interests. Hence, the preferred term 'promptly' to emphasise the importance of timely payment.  

The subcommittee considered it neatest for the responsible party to make direct payment of the fee to the relevant agency.  At the time of drafting, it was unclear whether a charterer would be able to make direct payment to a US agency for what is essentially port fees on the current system.  However, the subcommittee understood that revised system would allow online payment by various parties including charterers.  

Given the significant sums in fees anticipated it would be unduly burdensome on local agents both administratively and commercially to direct payment through them. Hence, payments via local agents have been specifically excluded.

Subclause (f)
It is anticipated that when the USTR fees first come into effect that US Agencies may demand a party (likely owners) make payment in the first instance.  This clause anticipates that the responsible party is primarily charterers.  Hence, this subclause (f) allows the paying party to be reimbursed by the responsible party.

Again, the subcommittee was cautious about setting a strict time frame for payment, as this may vary from case to case. Hence, the preferred term 'promptly' to emphasise the importance of timely payment.

Subclauses (g) 
This subclause specifies remedies for charterers failure to make prompt payment or reimbursement of the fees.  Subclause (g)(i) requires charterers to take immediate steps to rectify the failure.  The subcommittee decided against setting a time frame for rectification as this would vary from case to case. Parties may consider specifying a period by which charterers are to rectify their failure.
Subclause (g)(ii) allows for Owners to suspend performance where charterers have failed to make payment or reimbursement of the fees.  In such instances, premiums for additional insurance cover, e.g., Shipowners’ Liability Cover, may be incurred. The term “damages” at subclause (g)(iii) is intended to allow recovery of such expenses.

Subclause (h)
While the clause allows charterers to recover time lost arising from owners’ failure to make payment under subclause (h)(ii), this is not intended to trigger automatic off-hire but rather a basis for charterers to recover financial compensation.  The off-hire clause, if any will continue to govern off-hire events.

Copyright and Availability

Copyright in the BIMCO USTR Clause for Time Charter Parties 2025 is held by BIMCO.