Subject-matter jurisdiction over maritime disputes is held by the US federal courts. State and federal courts have concurrent jurisdiction over many matters that are not specifically in admiralty, and personal injury claims are often brought in state courts. However, certain claims such as vessel arrests, ship-mortgage foreclosures and attachment proceedings that present maritime disputes must be brought in federal courts. Just as there are no specialised first-instance courts specifically established for maritime matters, appeals of maritime matters in the federal system are handled by the Circuit Courts of Appeal, and (rarely and on a discretionary basis) the Supreme Court of the United States.

The US Coast Guard is responsible for port state control and enforces compliance with regulations under:

• the International Convention for the Safety of Life at Sea, 1974 (SOLAS);
• the International Convention for the Prevention of Pollution from Ships, 1973 (MARPOL);
• the International Ship and Port Facility Security (ISPS) Code; and
• other applicable laws and international conventions on vessels trading in US ports.

The Coast Guard is authorised to conduct examinations and enforce compliance with the laws and regulations within its ambit, and to detain or deny entry to the territorial waters of the United States for vessels operating outside acceptable standards. The Coast Guard may issue civil penalties for deficiencies, and vessels subject to a detention may be required to post a bond or letter of undertaking (LOU) covering the amount of the penalty to gain entry to a US port or obtain clearance to depart, or as security for possible fines. 

The Coast Guard has broad investigatory authority over marine casualties, and prepares and publishes reports on findings of fact, results of analysis, conclusions and recommendations. The National Transportation Safety Board (NTSB) also has investigative authority over marine casualties, and is concerned with determining the probable cause of those casualties and identifying safety recommendations to prevent similar events from occurring in the future.

Finally, the Coast Guard also functions as a law enforcement agency that may conduct criminal investigations separately or in co-ordination with other federal agencies, such as the Department of Justice and the Environmental Protection Agency, which may result in the issuance of fines or other sanctions, including (in some circumstances) criminal prosecution, for violations of security and environmental regulations.

The primary regulatory bodies for maritime activities in the United States include the US Coast Guard, the Maritime Administration, and US Customs and Border Protection.

Vessel registration, mortgage recordation, and safety and technical inspections are primarily the responsibility of the US Coast Guard. Registration of vessels and recordation of mortgages are handled by the US Coast Guard through the National Vessel Documentation Center (NVDC). Vessels of five net tons or more used for fishing or cabotage trade must be documented with the NVDC.

Among other things, the Maritime Administration:

• assists with government sealift programmes;
• manages a reserve sealift fleet;
• administers certain maritime grant programmes; and
• manages cargo preference activities.

The Maritime Administration also administers certain Jones Act waiver programmes. Maritime Administration approval is required to transfer a US-flagged vessel to foreign ownership, flag or registry.

US Customs and Border Protection is the primary regulator responsible for enforcing the Jones Act restrictions on cabotage trade and providing determinations regarding cargo compliance with the Jones Act.

A US-flagged vessel must be owned by a US citizen to be documented with the NVDC. However, there are different levels of citizenship with respect to certain entities and for certain trades. By way of example, for a corporation seeking to register a US-flagged vessel:

• the corporation must be formed under the laws of the United States or a state thereof;
• its chief executive officer must be a US citizen; and
• no more of its directors may be non-citizens than a minority of the number needed to constitute a quorum of the board.

Additional citizenship requirements apply to vessels being used for fisheries or cabotage trade.

The Jones Act regulates (among other things) cabotage trade within the United States. The Jones Act requires that vessels used for cabotage trade:

• be built in the United States;
• be at least 75%-owned by US citizens; and
• be US-flagged.

Additionally, the Jones Act requires that the Master, officers and 75% of the remaining crew of a vessel used for cabotage trade be US citizens. The complete rules and procedures for determining compliance with the Jones Act cabotage trade restrictions are voluminous, and each case must be looked at thoroughly and independently.

US laws do not permit the temporary registration of vessels, nor will they permit dual registrations.

With respect to US-flagged vessels, ship mortgages are required to be recorded with the NVDC. Perfection of security interests in certain other collateral common in ship-finance transactions, such as certain assignments of earnings, may be accomplished by filing Uniform Commercial Code (UCC) financing statements in appropriate jurisdictions.

Potential creditors may request a Certificate of Ownership or Abstract of Title from the NVDC that evidences the existence of any liens that have been recorded against a US-flagged vessel. Generally, the only liens recorded with the NVDC are preferred mortgage liens, although US law also permits the filing of a notice of claim of lien by anyone asserting a lien against a US-flagged vessel. It should be noted that, with the exception of ship mortgages, most maritime liens arise by operation of law and there is no requirement that they be recorded with the NVDC.

Potential creditors may also request a lien search from the relevant jurisdiction for recorded UCC financing statements relating to any potential debtors.

With respect to wreck removal, the United States has not adopted the Nairobi International Convention on the Removal of Wrecks (Wreck Removal Convention) 2007. Certain provisions of the Rivers and Harbors Act of 1899, also known as the Wreck Act, impose a duty of diligent removal on the owner, lessee or operator of a vessel sunken in a navigable waterway. Failure to remove such a vessel subjects it to removal by the US government, and subjects the vessel-owner, lessee or operator to reimbursing the government for the cost of removal or destruction and disposal.

With respect to pollution, currently the United States is a signatory to Annexes I, II, III, V and VI of MARPOL. These annexes have been incorporated into US law by the Act to Prevent Pollution from Ships (APPS) and implemented within 33 USC 1901 and 33 CFR 151. The US incorporates Annex III by the Hazardous Materials Transportation Act (HMTA), implemented within 46 USC 2101 and 49 CFR 171–174 and 176. The USA has not ratified Annex IV, but has equivalent regulations under the Federal Water Pollution Control Act (FWPCA) (as amended by the Clean Water Act, 33 USC 1251 et seq, and implemented by 33 CFR 159) for treatment and discharge standards of shipboard sewage.

On 4 December 2018, the “Vessel Incidental Discharge Act” or VIDA was also signed into law, restructuring the way the Environmental Protection Agency (EPA) and US Coast Guard regulate incidental discharges from commercial vessels. The VIDA requires the EPA and the US Coast Guard to develop standards of performance and implementing regulations, respectively, for these discharges. Until the EPA publishes final standards and the US Coast Guard publishes corresponding implementing regulations, the existing EPA Vessel General Permit (VGP) and US Coast Guard ballast water regulations remain in full force and effect.

As of October 2023, the EPA published a Supplemental Notice of Proposed Rulemaking proposing national performance standards, which may be finalised in 2024.

Finally, the USA likewise has an extensive body of federal and state environmental laws and regulations concerning oil-pollution prevention and spill response, including (for example) the Oil Pollution Act of 1990, 33 USC Section 2701, et seq.

The United States did not ratify the Brussels Collision Liability Convention of 1910, and has historically followed the general maritime law of the United States, only belatedly adopting principles of proportionate liability and comparative fault. The United States adheres to the International Regulations for Preventing Collisions at Sea, 1972 (COLREGS). The US Departments of Defense and Commerce, as well as the Coast Guard within the Department of Homeland Security, publish regulations to ensure US compliance with COLREGS.

As for salvage, the United States has adopted the International Convention on Salvage, 1989. Courts have noted the parallels between the 1989 Salvage Convention and pre-existing general maritime law, and continue to look to applicable maritime law principles in those cases.

The USA is not a party to the 1976 Convention on Limitation of Liability for Maritime Claims, and continues to apply the Limitation of Liability Act (the “Limitation Act”), passed in 1851 to encourage investment in shipping. The Limitation Act permits vessel-owners (including demise charterers) to limit their liability to the value of the vessel and pending freight in certain circumstances where the loss occurred without the privity or knowledge of the owner.

The Limitation Act may be applied to a wide variety of claims but is not generally favoured by the courts, and there are different limits in cases of personal injury and death, pollution liabilities, wage claims and others. Limitation may also apply to claims brought by the US government.

Notably, in December 2022 the USA passed amendments to the Limitation Act excluding covered small passenger vessels from receiving the benefits of limitation, and extending the minimum limitations period for giving notice of or filing claims for personal injury or death from six months to two years.

Procedurally, a vessel-owner’s action for limitation must be commenced within six months of the owner being given adequate written notice of a claim, whether or not a claimant has initiated a legal proceeding. Deposit of the fund is required, and disputes may arise with respect to valuation (ie, whether the deposit represents the value of the vessel).

The USA is not a party to the Maritime Labour Convention (MLC), but the US Coast Guard has established a voluntary inspection programme for vessel owners/operators who seek to document compliance with the standards set out in the MLC. US-flagged commercial vessels that operate on international routes to ports of countries that have ratified the MLC are encouraged to participate, given that such vessels may be subject to port state control actions when operating in the port of a ratifying nation. 

US shipping laws and regulations provide protections, including (among others) under:

• the Occupational Safety and Health Act (29 USC Chapter 15);
• the requirement to establish safety management systems on board vessels; and
• associated regulations (eg, 46 USC Chapter 33 and 33 CFR Part 96).

Although US-flagged vessels are not subject to the MLC, there is an amalgam of common-law and statutory remedies available to seafarers, such as regarding:

• maintenance and cure;
• Jones Act claims for negligence or general maritime claims for unseaworthiness;
• wage and hour claims supplied by the Fair Labor Standards Act; or
• wrongful death claims under the Death on the High Seas Act.

The US Carriage of Goods by Sea Act (COGSA) governs all contracts for carriage of goods by sea to or from ports of the United States in foreign trade (and bills of lading as evidence of such contracts): see 46 USC Section 30701, Note Section 13. The COGSA governs the carrier’s liability to cargo interests whenever a bill of lading or similar document of title is the contract of carriage. The “carrier” is identified in the COGSA as “the owner, manager, charterer, agent or Master” of a vessel and can include all owners or charterers involved with carrying the cargo.

The USA applies a version of the Hague Rules through the Carriage of Goods by Sea Act and the Harter Act. The USA has also signed the Rotterdam Rules, which are not yet ratified. The COGSA has been in place for generations and provides a reasonable and predictable cargo loss and damage liability regime.

Regarding the question of who has title to sue on a bill of lading, such cargo claims are typically brought by cargo-owners or their subrogated insurers.

Under the COGSA, a ship-owner may not be liable if it is not the contractual carrier. However, the vessel itself may be liable in rem in respect of it carrying the cargo and ratifying the terms of the bill of lading.

A claim for misdeclaration of cargo would be treated as a breach-of-contract claim under the governing bill of lading. Federal district courts have approved of such claims. See, for example:

• MSC Mediterranean Shipping Co v Metal Worldwide, Inc, 884 F Supp 2d 1269, 1275 (SD Fla 2012) (granting summary judgment to the carrier for breach of contract arising from the shipper’s failure to accurately declare weight and contents of the subject containers); and
• Mitsui OSK Lines, Ltd v CB Freight Int’l, Inc, No 4:16-cv-05002-KAW, 2016 US Dist LEXIS 181186, at *16 (ND Cal 16 December 2016) (granting default judgment upon numerous misdeclarations and misdescriptions of cargo over a period of years).

Cargo claims must be brought within one year from the date when the goods were delivered or should have been delivered, under Section 3(6) of COGSA: 46 USC Section 30701 note (formerly codified at 46 USC Section 1303(6)). That said, claims for indemnity or contribution will typically not accrue until liability is fixed by a judgment against or payment by the indemnitee.

The United States is not a signatory to international conventions that govern ship arrest. Rather, ship arrests are governed under substantive federal law and the Federal Rules of Civil Procedure.

With certain very limited exceptions, any person providing “necessaries” to a vessel on the order of the owner, or a person authorised by its owner, is entitled to a maritime lien claim enforceable by a civil action in rem in the federal courts.

As in other areas of the law, each asserted claim must be independently examined in the context in which it arises; however, as a general rule, the supplier of goods and services to a vessel essential for the operation and navigation of that vessel is likely to have a lien for the supply of necessaries. It is important to note that, in many circumstances, the US courts will look to the law of the jurisdiction in which the claim arose to determine the existence of the lien. Hence, notwithstanding the foregoing, if the jurisdiction where fuel oil was supplied to a vessel does not grant the supplier a lien under local law, the federal courts might not recognise it.

Other liens commonly recognised under US law include:

• those for the wages of the Master and the crew of a vessel and for any stevedore employed directly by a vessel;
• liens for damages arising out of a maritime tort;
• liens for general average; and
• liens for salvage, including contract salvage.

The maritime liens listed above will have priority over a ship mortgage, as will expenses for a vessel while in possession of a court during a foreclosure proceeding. Additionally, a lien for necessaries supplied in the USA has priority over the lien of a preferred mortgage on a foreign-flagged vessel. Other maritime liens include contract liens for breach of a charterparty, which will be subordinate to preferred mortgage liens if incurred subsequent to the recordation of the mortgage.

There is no requirement of an in personam owner or demise charter liability in order for a vessel to be arrested. Under the Commercial Instruments and Maritime Lien Act (46 USC Section 31301 et seq), vessel arrests may proceed in rem against the vessel as long as necessaries are supplied on the order of the owner or a person authorised by the owner. Under the statute, charterers are generally presumed to have authority to procure necessaries for the vessel, and suppliers of necessaries are also generally presumed to rely on the credit of the vessel and will typically be entitled to a maritime lien unless they have actual notice of a “no lien” clause in the charter. Vessels are routinely arrested to enforce necessaries liens and many ship mortgage foreclosures are commenced by such suppliers rather than mortgage banks.

Arrest proceedings commenced in rem against the vessel provide a vehicle for an unpaid supplier of bunkers – who provided necessaries on the order of the owner or a person authorised by the owner – to seek recovery of the reasonable value of the necessaries supplied.

See 4.3 Liability in Personam for Owners or Demise Charterers regarding the Commercial Instruments and Maritime Lien Act (46 USC Section 31301 et seq) and vessel arrests.

In a Rule B action seeking an in personam attachment or garnishment – which may include vessel seizures – the court requires a verified complaint by the plaintiff setting forth a prima facie valid admiralty claim at the time of the filing of the complaint, and an accompanying affidavit signed by the plaintiff or the plaintiff’s attorney stating that, to the affiant’s knowledge, or on information and belief, the defendant cannot be found within the district.

In a Rule C in rem arrest action, the court likewise requires a verified complaint that describes with reasonable particularity the property that is the subject of the action, and that the property be within the district or will be within the district while the action is pending.

Although arrest proceedings are more commonly brought against the vessel itself, Rule B attachment proceedings could encompass proceedings to arrest bunkers or freight as part of a maritime lien claim or proceeding in aid of arbitration. Rule B provides that “a verified complaint may contain a prayer for process to attach the defendant’s tangible or intangible personal property — up to the amount sued for — in the hands of garnishees named in the process”. Bunkers and freight may therefore be seized in so far as they are a “defendant’s tangible or intangible personal property”.

There is no associated or sister-ship arrest regime in the USA. However, property of the defendant may be attached under Rule B of the Supplemental Rules and, where the defendant owns a vessel and if the requirements of Rule B are met, that vessel may be seized as part of a maritime attachment proceeding. Maritime attachment is available under Rule B where a plaintiff has a maritime claim (not necessarily a lien claim), and that plaintiff can attach property of the defendant, provided that the defendant is not found within the federal judicial district where the property is located for jurisdictional and service-of-process purposes. Some parties may also seek to “pierce the corporate veil” to reach associated vessels.

Apart from ship-arrest proceedings under Rule C, a Rule B attachment proceeding is the primary means by which pre-judgment security may be obtained. See also 4.6 Arresting Bunkers and Freight and 4.7 Sister-Ship Arrest.

The options available to an owner or other interested party to release an arrested vessel are set out under Rule E(5) of the Supplemental Rules. Rule E(5) allows the parties to post security in order to secure a vessel’s release, by stipulating “the amount and nature of such security” by way of a special or general bond conditioned to answer the judgment of the court or of any appellate court. Accordingly, a Club LOU or other third-party surety bond may be acceptable, if the parties can agree.

In the absence of agreement between the parties, the court may direct that the principal sum of the bond be set at an amount sufficient to cover the plaintiff’s claim, fairly stated with accrued interest and costs, up to a maximum of the smaller of twice the amount of the plaintiff’s claim or its value upon due appraisement, with interest upon that amount at 6% per annum. Motions to reduce or enhance the amount of security may subsequently be made for good cause shown under Rule E(6). The release of a vessel is likewise conditional on the payment of all costs and charges of the court and of the US Marshal or other substitute custodian.

Any party to the action, the US Marshal or a substitute custodian may apply for a sale of the vessel. In practice, it is usually the mortgagee bank or single largest creditor that moves to have the vessel sold.

In the event of an application for interlocutory sale, judicial input is limited to confirming that notice of the action and arrest of the vessel, as well as notice of the motion for sale, is in compliance with statutory authority and any applicable local rules of court. Although a broker may be involved or other procedures may be agreed pursuant to a court order, judicial sales are otherwise conducted by the US Marshal.

The Marshal will charge poundage in the amount of 3% of the first USD1,000 of proceeds and 1.5% of proceeds above that amount, and a brokerage commission may be paid if a broker is engaged for the sale. The proceeds of the sale of the vessel are paid into the registry of the court and distributed according to the rank and priority of liens, subsequent to the confirmation of sale of the vessel, at which point the vessel is delivered to the buyer free and clear of liens. The relative priority of similarly ranked liens often follows a reverse-chronology priority regime where the most recent lien of equal rank possesses the superior claim (ie, “last in time, first in right”).

In general, challenges to vessel sales may proceed prior to confirmation upon grounds of fraud, collusion or gross inadequacy of price.

In the United States, insolvency proceedings are governed by the US Bankruptcy Code and heard by federal bankruptcy courts, including reorganisation proceedings under Chapter 11 of the Bankruptcy Code. Generally, the automatic stay applicable in all Chapter 11 cases under the Bankruptcy Code would act to prohibit or stop any arrest and judicial sale of a vessel owned by owners that are subject to Chapter 11 proceedings. However, courts in at least one US jurisdiction have held that the automatic stay does not prevent actions with respect to certain types of maritime liens, and would allow a federal court sitting in admiralty to retain in rem jurisdiction over an arrested vessel and to conduct a judicial sale, provided that the action was commenced prior to the filing of the Chapter 11 proceeding.

Damages may be awarded against an arresting party under circumstances where that party has been found to have made a wrongful arrest. However, such a claim requires showing that the arresting party has no bona fide claim, together with establishing bad faith, malice or gross negligence.

The United States is not a party to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974. As such, passenger claims in the United States that involve personal injury or death will be governed by applicable contracts of carriage and the general maritime law of the United States. Although a ship-owner may not limit its liability for negligence to passengers under the Limitation Act, that act may provide limitation in respect of cargo loss, personal injury or death incurred “without the privity or knowledge of the owner”.

Unless modified by contract, the default limitations period for a claim of personal injury or death arising from a maritime tort is three years.

Other statutes also limit the scope of contractually modified limitations periods that may be agreed with respect to passenger claims. Contractual periods may be no less than one year to file suit running from the date of injury or death, and no less than six months to provide notice of, or file a claim for, personal injury or death, subject to tolling rules for claims involving a minor or mental incompetent or in the event of wrongful death, until the earlier of:

• the date that a legal representative is appointed; or
• three years after the injury or death.

If a contract requires the claimant to provide notice of a claim, failure to provide notice may permit a defence to liability unless there is a finding that:

• the carrier knew of the injury or death and the vessel was not prejudiced by the failure;
• there was a satisfactory reason why notice could not have been given; or
• the owner failed to object to the failure to give notice.

Indemnities for personal injury passenger claims may also be considered as maritime claims or liens to the extent that they are ripe and sufficiently related to the underlying maritime claim. Under Federal Rule of Civil Procedure 14(c), for example, when a plaintiff asserts an admiralty or maritime claim, a defendant (as third-party plaintiff), is entitled to implead a third-party defendant “who may be wholly or partly liable” for “remedy over, contribution or otherwise on account of the same transaction, occurrence or series of transactions or occurrences”.

Contracts for carriage of goods by sea must be construed in the same way as any other contracts: by their terms and consistent with the intent of the parties. As such, where parties clearly specify in their contractual agreement which law will apply, admiralty courts will generally give effect to that choice. The COGSA applies “tackle to tackle” by force of law, but the period it covers (eg, pre-loading and post-discharge or carriage between two non-US ports) may frequently be extended by clauses in bills of lading.

As a matter of contract interpretation, federal courts sitting in admiralty seek to interpret a contract “so as to give meaning to all of its terms – presuming that every provision was intended to accomplish some purpose, and that none are deemed superfluous”. For instance, see Foster Wheeler Energy Corp v An Ning Jiang MV, etc, 383 F 3d 349, 354 (5th Cir 2004). Ambiguities can lead to disputes – for example, if a competing regime applies a higher limitation of liability than the COGSA’s USD500 per package limitation – and, as such, careful attention should be paid to the contract language including its choice-of-law and forum selection provisions. See Foster Wheeler.

Forum selection, arbitration and choice-of-law clauses are enforced if they are properly incorporated into the bill of lading.

The terms of a charterparty can be incorporated into a bill of lading, provided it is clearly done on the face of the bill of lading.

Foreign forum selection clauses and foreign arbitration clauses found in incorporated charterparties are enforced if the charterparty is properly incorporated into the bill of lading. In order to enforce an arbitration clause against a third-party holder, a bill of lading should specifically identify the charterparty and clearly incorporate the arbitration clause. A party seeking to avoid enforcement of a foreign arbitration or forum selection clause has the burden of proving a likelihood that “the substantive law to be applied will reduce the carrier’s obligations to the cargo owner below what COGSA guarantees”. See Vimar Seguros Y Reaseguros v M/V Sky Reefer, 515 US 528, 539, 115 S Ct 2322, 2329 (1995).

The USA is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the “New York Convention”), as implemented by the Federal Arbitration Act, 9 USC Section 201 et seq (FAA). The grounds for resisting enforcement of the award are limited. As specified in the FAA, “[t]he court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention”. As such, the FAA incorporates only the limited enumerated exceptions or defences set forth in Article V of the New York Convention. In the absence of such a defence, a US court “shall confirm” the award.

Many states have laws allowing the courts to enforce foreign money judgments through adoption of versions of the Uniform Foreign-Country Money Judgments Recognition Act. The procedures and defences can vary from state to state, and as such are beyond the scope of this summary. In the absence of a statutory scheme, states will rely on the common law primarily based on principles of international comity.

As previously stated, the USA is a party to the New York Convention, as implemented by the FAA 9 USC Section 201 et seq (see 6.3 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards).

Arbitration and mediation are available as alternative sources of conflict resolution. The relevant arbitral body is the Society of Maritime Arbitrators (SMA) in New York. Houston and Miami also are looking to become centres of maritime arbitration. Many charters specifying arbitration in New York are ad hoc and do not require that arbitrators be selected from any specific arbitral body.

The SMA provides only limited administration of arbitrations, which generally proceed autonomously under the rules published by that body. The SMA is very active in promoting maritime arbitration in the USA, in maintaining its roster of arbitrators and in publishing panel awards, which are available on the LEXIS and Westlaw services. The SMA likewise publishes rules for confidential, voluntary and non-binding mediation proceedings, should circumstances warrant the use of that device.

A motion to compel arbitration or a motion to dismiss for lack of jurisdiction would be the typical first-line remedies for a situation where proceedings are commenced in breach of a foreign jurisdiction or arbitration clause.

Additional remedies for responding to proceedings commenced in breach of a valid and enforceable foreign jurisdiction or arbitration clause, such as seeking an award of sanctions or attorneys’ fees, would require an additional showing of clear evidence of bad-faith conduct, in order to fall outside the general rule in the USA that each party pays its own attorneys’ fees.

The United States imposes a flat 4% tax on a non-US corporation’s US-sourced gross transportation income, which includes income from spot and time charters where the vessel carries cargo to or from a US port, to the extent that such income is not considered Effectively Connected Income (ECI). A non-US corporation may be eligible for a statutory exemption from this tax if it is organised in a qualifying foreign jurisdiction and satisfies certain ownership and documentation requirements.

US persons who own foreign corporations that own vessels may be subject to certain US federal income tax consequences and filing obligations. Beginning in 2018, shipping income that was previously excluded from subpart F income of a “United States shareholder” of a “controlled foreign corporation” was subject to US taxation as “global intangible low-taxed income”, or GILTI. In 2019, the Internal Revenue Service released guidance informing taxpayers that an election could be made with respect to GILTI, which may mitigate potentially adverse US federal income tax consequences of GILTI.

“Force majeure” events are recognised under US law and will in general be governed by the particular terms of the parties’ agreement as well as the governing law, which may be subject to variation from state to state. Force majeure clauses may permit a party to terminate or waive certain performance obligations due to the occurrence of an event which causes that party to have delayed performance or to have failed to perform under the parties’ agreement, but do not typically protect against risks that are contemplated or obligations expressly assumed at the time of the contract. The burden of demonstrating a force majeure event also falls on the non-performing party seeking to have its performance excused.

Likewise, the common-law frustration-of-purpose doctrine permits a party to stop performing under a contract when a wholly unforeseeable event renders the contract valueless to that party. Parties have also raised the extra-contractual doctrines of impossibility or impracticability to seek an excuse from performance. However, these concepts are construed quite narrowly under contract law.

Some courts hearing arguments relating to non-performance of commercial lease obligations in light of the COVID-19 pandemic have observed that allegations of “particularly adverse financial consequences from the COVID-19 pandemic does not amount to frustration of the purpose” of those contracts, under circumstances where the contract did not contain an applicable force majeure clause. See, for instance, Gap Inc v Ponte Gadea NY LLC, 524 F Supp 3d 224, 235 (SDNY 2021).

As previously noted, the United States is a signatory to Annex VI of MARPOL, which includes the global cap on the sulphur content of fuel oil and, as of 1 January 2020, the amended “IMO 2020” limits – reducing the sulphur content of fuel used on most commercial ships to 0.5% mass by mass (m/m), down from the previous limit of 3.5% m/m. As of 1 March 2020, the carriage of fuel oil for use on board ships was also prohibited if the sulphur content exceeded 0.5%, unless fitted with an equivalent alternative (eg, scrubbers) to meet that limit.

There are MARPOL Emission Control Areas (ECAs) in force in and around the United States, for which sulphur content standards are even stricter. As of 1 January 2015, ships operating within an ECA are not permitted to use fuel with a sulphur content in excess of 0.1% m/m. Currently, the IMO has designated four ECAs, including specified portions of the Baltic Sea area, North Sea area, North American area and United States Caribbean area. The North American ECA includes specified areas of the United States and Canadian coastline, and the United States Caribbean ECA includes Puerto Rico and the US Virgin Islands.

The US Coast Guard monitors compliance with the sulphur limits and will continue to verify compliance with the 0.1% standard in ECA ports, and with the 0.5% standard in non-ECA ports. Deficiencies may be addressed administratively with the Coast Guard, or in sufficiently severe circumstances by way of referral to the EPA for further action. The EPA has published settlements involving civil penalties for violations of the fuel content limitations on its website.

The USA has incorporated and implemented wide-ranging economic and trade sanctions programmes, including through the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA). The IEEPA permits the President to declare national emergencies in response to national security, foreign policy or economic threats. Similarly, the TWEA authorises the President to restrict trade between the USA and foreign nations during wartime. The USA has also implemented international trade sanctions adopted by the United Nations through the United Nations Participation Act of 1945.

The USA’s economic and trade sanctions programmes generally prohibit US persons from transacting, directly or indirectly, with sanctioned actors, governments and those located in certain jurisdictions (eg, Cuba, Iran, North Korea, Syria, and the Crimea region and so-called Donetsk and Luhansk People’s Republics of Ukraine). The USA’s economic and trade sanctions programmes also prohibit importation and exportation to and from certain jurisdictions, as well as dealing in property or interests in property that are required to be blocked (ie, asset-freezing). Notably, the USA has also enacted secondary sanctions that have an extraterritorial effect, authorising broad penalties against foreign persons who engage in certain activities, including transactions with certain designated individuals, entities and governments.

US economic and trade sanctions are primarily administered and enforced by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC). The US Department of State implements certain sanctions programmes, including the International Traffic in Arms Regulations, while the US Department of Commerce administers and enforces the USA’s export control laws.

The US Department of Justice has jurisdiction to enforce criminal violations of US sanctions laws, while the OFAC has jurisdiction to enforce civil violations. The OFAC and the DOJ regularly bring enforcement actions for violations of US sanctions laws, which can include monetary penalties and prison sentences (for criminal violations). Additionally, the OFAC, along with other US government agencies, have encouraged the private sector to adopt and implement sanctions compliance programmes.

Since the onset of the Russia-Ukraine war in February 2022, the USA has implemented a wide range of sanctions and export controls against the Russian Federation and its supporters. In the shipping industry, this has included prohibitions on the importation of certain Russian energy products into the USA (such as crude oil, petroleum, petroleum fuels, oils, liquefied natural gas and coal), as well as prohibitions on all new investments in Russia by US persons, among other restrictions.

Moreover, following the G7’s policy agreement to implement a cap on the price of Russian oil and petroleum products in September 2022, the OFAC has implemented that policy by prohibiting US persons from engaging in a variety of specified services related to the maritime transport of Russian Federation-origin crude oil and petroleum products, including:

• trading/commodities brokering;
• financing;
• shipping;
• insurance (such as reinsurance, protection and indemnity);
• flagging; and
• customs brokering.

These prohibitions took effect on 5 December 2022 with respect to the maritime transport of crude oil, and on 5 February 2023 with respect to the maritime transport of other petroleum products. The OFAC has published detailed guidance for compliance with the policy, including a safe harbour for service providers acting in compliance with the price cap, which requires attention to a record-keeping and attestation process to avoid strict liability for breach of sanctions. In 2023 there was significant tightening and increased enforcement of the price cap policy by the OFAC and its partners.

The OFAC issues general and specific licences that provide an administrative mechanism for a party to request authorisation to engage in a transaction that would otherwise be prohibited by sanctions. A general licence authorises a particular type of transaction for a class of persons without the need to apply for a licence. A specific licence is a written document issued by the OFAC to a particular person or entity, authorising a particular transaction in response to a written licence application. Authorisation is subject in all events to the terms and conditions of the licence.

One of the key legal and commercial implications of the war in Ukraine is that, since the onset of the conflict in February 2022, the USA has substantially expanded sanctions against individuals, entities and vessels connected to the Russian Federation. As noted in 8.3 Trade Sanctions, US sanctions against Russia include:

• prohibitions on the importation of certain Russian energy products into the USA, together with gold, diamonds and certain other goods;
• prohibitions on “new investments” in Russia by US persons; and
• implementation and enforcement of the international price cap policy prohibiting the maritime transport of Russian oil, unless in compliance with the relevant price cap.

Thousands of individuals and entities have also been designated for full blocking sanctions. 

More broadly, US sanctions also prohibit most major Russian banks from conducting transactions in US dollars or with US persons, and the USA has:

• expanded export controls concerning sensitive US technologies;
• banned the exportation of luxury goods and certain services to Russia;
• raised tariffs on a multitude of Russian-origin imports; and
• prohibited Russian use of US ports and airspace.

With respect to other legal or commercial implications, supply chain disruptions arising from the war in Ukraine have been relatively muted in the USA, given the relatively modest prior trade flows between the USA, Russia and Ukraine.

Readers should take note of several items covered in the US Trends and Developments chapter in this guide, which examines a number of additional issues currently of note with respect to US legal developments in the shipping industry. These include the following:

• the continued focus on sanctions enforcement and compliance, particularly with the raft of sanctions imposed on Russia since the onset of the Russia-Ukraine war;
• the recent US interest in strengthening its domestic fleet of US-flagged commercial and tanker vessels under the Maritime Security Program and Tanker Security Program;
• ongoing developments and available tax incentives for qualifying entities in the US offshore wind industry; and
• the implementation of the Corporate Transparency Act’s reporting obligations of beneficial ownership information for covered “reporting companies”.