ING: Port Fees for Chinese Ships Would Raise Cost for U.S. Shippers

 

If implemented, the Trump administration's proposed million-dollar port fees for Chinese-built ships would increase costs for American shippers, according to analysts for Dutch banking group ING. 

The White House's Office of the U.S. Trade Representative has proposed unprecedented access fees for Chinese-operated and Chinese-built ships, ranging up to $1.5 million per port call. The objective is to counter the support that China has provided to its yards and shipowners for decades; China now leads the world in shipbuilding and (by some measures) shipowning.  

In a notice earlier this week, the USTR announced that it has determined that "China’s targeting of the maritime, logistics, and shipbuilding sectors for dominance is unreasonable and burdens or restricts U.S. commerce." It laid out a series of possible million-dollar port call fees for Chinese vessel operators, other operators of Chinese-built ships, and operators with newbuilds on order at Chinese yards (China's orderbook accounts for more than half of all new tonnage). USTR is taking public comments on the proposal until late March, and the results will be forwarded to President Donald Trump for a decision. 

Chinese-built tonnage accounts for 17 percent of all boxship port calls in the United States, and more on specific trade lanes. According to ING, the fees - if imposed as advertised - would exclude state-owned Chinese carrier COSCO from U.S. ports. All other large carriers are based in Europe or Asia, and would be subject to the proposal's "Chinese-built" port call fees. As China holds a particular dominance in the construction of container ships - accounting for 60 percent of the boxship orderbook - the fees will likely rise. As the fee structure is assessed based on the composition of each operator's entire global fleet, simply rerouting Chinese-built ships onto non-U.S. rotations would not be enough to evade the extra cost. "These additional expenses would likely be passed on from the carrier to shippers and, ultimately, to importers and exporters," ING's analysts cautioned.         

The USTR also proposed an ambitious quota requirement for up to 15 percent of U.S. exports to be shipped aboard U.S.-flagged ships by 2032 - including five percent aboard U.S.-built ships. ING expressed skepticism that U.S. yards have the capacity or the workforce resources to build large tonnage at that scale on a seven-year timeframe. 

Shipping interests are famously adept at circumventing control measures, and one loophole appears to be available. Canada has ports that are not in the United States, and these would be exempt from any U.S. port fees. Many shippers already send large quantities of cargo from Asia to Prince Rupert and Vancouver, B.C., then have it moved into the U.S. heartland by intermodal rail. The fee would prompt U.S. shippers to shift more cargo to trans-Canadian routes, noted Flexport CEO Ryan Petersen in a social media message.