THE Office of the United States Trade Representative is undertaking public hearings this week into the Trump Administration’s plans to boost domestic shipbuilding and use of US flag tonnage by imposing huge fees on Chinese-owned, operated and/or built merchant vessels calling US ports.

The proposals emerged from a USTR investigation that concluded China has come to dominate the maritime world, resulting in the Office recommending actions “aimed to obtain the elimination of China’s acts, policies, and practices targeting the maritime, logistics, and shipbuilding sectors for dominance. In this Section 301 investigation, USTR has found China’s acts, policies, and practices to be unreasonable and to burden or restrict US commerce”.

A wide range of maritime, industry and trade associations made a total of 317 submissions to the Office by Monday’s deadline, with media reporting the vast majority have warned of significant and unintended consequences for US shippers and global trade.

While there is support amongst submitters for a revival of the US shipbuilding industry the total impracticality of local builders replacing Chinese counterparts, and of other shipbuilding nations taking up the slack, has been raised by international bodies. It has been noted that US commercial shipbuilding already relies on expertise from Japanese, South Korean, German, Finnish and indeed Australian builders and associated suppliers.

However, it is the potential impact of the proposed port fees – US$1.5 million per port call for targeted ships – that has raised greatest ire, with most parties pointing out it is US interests that will suffer the greatest penalties in terms of added costs for importers and exporters and the risk shipowners and operators will curtail or withdraw services.

Analysis by Clarkson Research Services found over a third of the global trading fleet has been built by Chinese yards, while US-built vessels represent just 0.4%. An estimated 83% of container ships calling at US ports last year would have been subject to the fees, as well as a substantial number of PCTC/ro-ros and crude oil tankers, CRS found.

The National Retail Federation and the Retail Industry Leaders Association, along with 30 other organisations representing a variety of industries, commissioned a study by Trade Partnership Worldwide LLC to examine the potential ramifications of the actions USTR has proposed. The study found that the proposed actions would have far-reaching negative effects on the prices of imports and exports.

“Imports and exports decline as a result of the higher costs of the fees, and/or the mandate to use more expensive U.S.-built, U.S.-owned and U.S.-operated ships. While the potential negative impacts on U.S. agriculture are ‘headline-grabbing,’ those negative impacts extend as well to other sectors of the American economy, including retail. As higher costs filter through the economy, the wholesale and retail trade sectors, from stores to restaurants, see declines in sales and employment,” the study concluded.

In a joint submission to USTR, the two organisations wrote: “As a result, U.S. businesses and consumers will take the brunt of these service charges and be forced to bear increased costs for a wide array of commodities with little to no alternatives as many, if not all, of the leading ocean carriers capable of meeting U.S. shipping needs use Chinese-built vessels in their fleets.” 

The joint letter outlined the concerns of retailers about the port service fee being passed along to cargo owners at a significant cost. The concerns also include carriers changing their rotations to avoid the fees by cutting out smaller ports and overwhelming larger ports, causing congestion and other supply chain challenges.

One retailer described the possible ramifications: “We are concerned that the trifecta of China and reciprocal tariffs; the new aluminium/steel derivative tariffs; and the China-ship fee will put extraordinary pressure on U.S. retailers. (One notable example would be cast aluminium outdoor furniture.) In some sectors that are already struggling under the current economic and housing market conditions, such as furniture and home improvements, the proposed fees could nearly double the cost to import these items.”

“We encourage the administration to continue to investigate the barriers and limitations on US shipbuilding and to seek other means to help revitalise the industry, without burdening those who rely upon it,” said David French, NRF’s executive vice president of government relations.

“The goal of revitalizing the American shipbuilding industry is laudable, however, these new fees will have ripple effects across the U.S. economy. If enacted, these policies will disrupt the flow of commerce, add regulatory burdens and increase costs on American manufacturers and consumers. RILA looks forward to collaborating with the administration on ways to revitalize the US shipping industry while minimizing disruptions to competitiveness, businesses and consumers,” said Michael Hanson, RILA’s senior executive vice president, public affairs.

See also:
US’s China charges will hit SOPAC shippers; US levies on Chinese shipping to hit Aussie exporters