Port Fees on Chinese Ships Would Hit U.S. Ag, Energy and Shipping

 

While businesses have been closely following the Trump administration's tariff policies, the seven-figure port fee proposal from the US Trade Representative (USTR) could have even deeper effects on American shipping interests. If adopted, Chinese-built ships - and global operators who use Chinese-built ships elsewhere - would have to pay millions of dollars for every port call in the U.S. Exporters would be required to ship an increasing percentage of their goods on U.S.-flagged tonnage, and eventually on scarce U.S.-built tonnage. This plan's steep costs could be enough to put some smaller companies out of business, drive others away from American shores, or end some categories of American exports altogether, maritime businesses and shippers warned in comments to the USTR. 

ACL, the conro specialist that operates in Transatlantic trade, handles more than half of the American heavy machinery and equipment exports from New York, Baltimore and Norfolk to Europe. It is the only U.S.-headquartered carrier serving these American manufacturers on the East Coast. In a submission to the USTR, ACL explained that it went to China to buy all five of its specialized new conros because no one else would build them. In 2012, the few qualified U.S. yards said that they were booked seven years out with Navy work; Japanese yards didn't want to bid on such a small series; and Korean yards said that it wasn't worth the cost of doing a design for just five vessels. When ACL asked around in China, it received a competitive offer, and the vessels got built under class supervision in Shanghai. 

If the multi-million-dollar fees went into effect, ACL said, it would make the company "totally uncompetitive versus the other carriers in the US trades," and ACL would be forced to shut down its U.S. operations. It would cease services, close its U.S. headquarters, lay off its staff and leave American shippers using foreign shipping services. Those foreign operators would become dramatically more expensive, ACL warned.

"US export container rates to Europe for a carrier with a Chinese-built fleet - now averaging $500 per 40-foot container today - would climb to around $2,500 per 40-foot overnight – a 500% increase – simply to cover the new service fee," ACL said. "American manufacturers would have less choice of carriers and face significantly higher transportation costs."

SeaPort Manatee, the largest port in Southwest Florida, noted that the port fees would likely end the U.S. operations of the regional line World Direct Shipping (WDS). WDS is a Florida-headquartered container line connecting the U.S. with Mexico, and supports about $1 billion a year in U.S. economic activity. "Cargo would be diverted from WDS vessels to trucks, resulting in 1,000 more trucks crossing the border each week, and increase congestion at Texas border crossings and increase wear/tear on U.S. highways," noted the port authority. "The proposed action is very likely to negatively impact United States supply chains . . . and negatively impact American businesses and families (e.g., lost jobs; increased cost of goods and services)."

U.S. agricultural interests are also concerned. The US Agriculture Transportation Coalition, a trade body for farmers who export goods by container, warned that the fees would "render US ag unaffordable and uncompetitive." The group believes that this would have an extreme impact on U.S. agricultural commodity exports. "Because there is ample substitute supply from other countries, it would end US ag sales to foreign markets," the association warned. 

Energy Products Partners, a leading U.S. midstream firm, warned that the fees would also have a devastating impact on oil and gas exports. If the fees take effect, "there will be no ‘drill baby drill’ [and] the ‘liquid gold’ under our feet would stay in the ground," EPP warned. 

The costs outlined by the USTR could also be just a starting point. Beijing could take its own actions in response, further raising costs, one established freight broker noted. "The reality is that, similar to the retaliation of U.S. trading partners to recent major tariff increases, similar fees would be imposed on U.S. ships calling Chinese ports," the broker warned. 

The International Longshore and Warehouse Union (ILWU)'s Washington branch also pointed out that the extra charges could incentivize carriers to simply offload cargo outside of the United States - in Mexico or Canada - and then truck it across the border without paying the port fees. Without parallel restrictions to equalize costs at the land border, U.S. port traffic and longshore jobs could decline.