COSCO blacklisted: Sanctions signal new front in US-China (maritime) rivalry

China’s state-owned COSCO Shipping Holdings has been placed on the US Department of Defense’s (DoD) sanctions list, together with 130 other Chinese companies, for their alleged ties to the country’s military.

As informed, the primary objective of this list, which now comprises a total of 134 companies, is to restrict the entities’ economic and technological interactions with the US and curb China’s military modernization efforts.

COSCO Shipping and its subsidiaries Cosco Shipping (North America) and Cosco Shipping Finance were disclosed in a Federal Register filing on January 7, 2025, where they were described as “Chinese military companies” providing commercial services or goods to support the People’s Liberation Army or related organizations.

Other ‘major’ players on the list include China Shipbuilding Trading (CSTC), China National Offshore Oil Corporation (CNOOC), and China International Marine Containers Group (CIMC). Companies within the energy transition space were named, too, such as battery manufacturer Contemporary Amperex Technology (CATL) and technology company Tencent Holdings.

As disclosed, while being blacklisted does not entail specific penalties, it could discourage American companies from dealing with the sanctioned businesses.

Since the black list saw the light of day, some of the organizations’ share prices listed on the Hong Kong stock exchange market have seen drops, with COSCO Shipping Holdings witnessing a fall of roughly 4.92%, and CNOOC seeing its shares going down by circa 3.4% as of January 9, 2025.

In response to finding itself on the US sanctions list, COSCO Shipping has underscored that the organization and all of its subsidiaries have “consistently adhered” to local laws and regulations, ensuring they maintained ‘strict’ compliance in all international operations and that the allegations against it were “unfounded”.

“We emphasize that none of the aforementioned companies are ‘Chinese military companies’. We will engage with U.S. authorities to clarify this matter. This designation does not impose sanctions or export controls, and our global operations will continue uninterrupted,” company representatives highlighted.

The US has long ambitioned to spearhead the global maritime industry. However, compared to China-flagged vessels totaling over 5,500 units, only 80 US-flagged ships are engaged in international commerce. US-based shipyards have been unable to produce oceangoing vessels at scale and an increasing demand for qualified mariners has complicated the country’s position on the worldwide shipping stage.

Intending to revitalize the American maritime industry, in late December 24, U.S. lawmakers unveiled a new act, dubbed “the SHIPS for America Act”, to secure its position in the industry, tackle the disparities, and enhance its competitiveness amid China’s growing influence.

The US-China rivalry, however, is a story that spans multiple convoluted chapters, including a history of sanctions by the US government. Specifically, both COSCO Shipping and CNOOC have been targeted by Washington in the past. The former’s subsidiaries COSCO Shipping Tanker (Dalian) and COSCO Shipping Tanker (Dalian) Seaman & Ship Management were sanctioned back in 2019 for hauling Iranian oil. The penalties were lifted the following year.

CNOOC, on the other hand, is believed to be one of the earliest Chinese state-owned enterprises to have taken a hit from Washington, having also been added to a Pentagon blacklist in 2021.

The most recent one, however, is considered by some as another potential escalation of the US-China tug of war, particularly in the face of the return to the White House of President-elect Donald Trump who was at the helm of the US when CNOOC was previously sanctioned.

Trump’s victory in the US 2024 elections is seen by ocean and air freight rate benchmarking and market intelligence platform Xeneta as a “step in the wrong direction” for international trade as importers fear another spike in ocean container shipping freight rates.

Namely, Xeneta’s data showed that when Trump upped tariffs on Chinese imports during his first term in the 2018 trade war, the freight rates increased by more than 70%. This time, the President-elect pledged he would introduce blanket tariffs of up to 20% on all imports into the US and additional tariffs of 60%-100% on goods from China.

Although he argued this would have zero impact on consumers, a study by the US National Retail Federation (NRF) found that American consumers could lose between $46 billion and $78 billion in spending power each year if said tariffs were implemented.

The recent sanctions on Chinese enterprises have brought to the surface another burning issue for the shipping industry as a whole: protectionism, i.e. government policies that restrict international trade to help domestic industries.

In its ICS Barometer Report 2023-2024 report, the International Chamber of Shipping (ICS) discovered that the COVID-19 pandemic, energy and trade security efforts to manage geopolitical unrest and comply with decarbonization targets, and economic policies favoring local manufacturing and consumption have led to an “alarming” rise in protectionism worldwide.

The report also emphasized that as newly imposed or relaxed tariffs reshape trade relationships, either disrupting long-standing patterns or fostering new ones, trade routes are bound to continue evolving, which could result in ‘costly and complex’ repercussions for shipping and the broader, global economy.

Speaking at the “Shaping the Future of Shipping Summit: Weathering the Storms” summit held in June 2024 in Montreal, Canada, and convened by the ICS and the Chamber of Marine Commerce, Canada (CMC), ICS Chairman Emanuele Grimaldi accentuated that the shipping industry was looking at an ‘unprecedented’ threat to free trade.

“The number of unilateral barriers to trade being imposed by countries is increasing exponentially. Now I understand that the intentions of such barriers may be well-meaning, but the reality is that trade is increasingly being weaponized as nations seek to obtain greater economic advantage or achieve political aims,” Grimaldi remarked.

During the summit, the other attendees also took the opportunity to urge governments to recognize the negative impacts that increased protectionism has been having on global trade.

“At a time when the world already faces significant challenges including the race to net zero and labor availability, protectionism just results in self-inflected wounds,” Bruce Burrows, President and CEO of the Chamber of Marine Commerce, concluded.