The Trump administration has proposed punitive new fees on international shipping that would target vessels owned by Chinese companies or manufactured in Chinese shipyards, promising to dramatically alter the economics of global trade.

The new policy would charge Chinese-owned cargo ships, as well as third-country flagged vessels built in China, $1 million or more per port-of-call in the U.S.

Large container ships often make multiple stops when delivering goods to the U.S., and would face new fees at each port.

The Office of the U.S. Trade Representative (USTR) published the proposal Friday, tying it to an investigation into allegations by several U.S. labor unions that China has unfairly distorted the international shipbuilding industry.

The investigation, conducted under Section 301 of the Trade Act of 1974, determined that the Chinese government has pursued a policy of subsidizing its domestic shipbuilding industry with the aim of “targeting for dominance” the global market.

Growing market share

The investigation pointed out that over the past 25 years, China’s share of the global shipbuilding industry has exploded. China accounted for about 5% of the total tonnage of ships manufactured in 1999. By 2023, the Chinese share of the market surpassed 50%.

The USTR found that Chinese policy “burdens or restricts U.S. commerce by undercutting business opportunities for and investments in the U.S. maritime, logistics, and shipbuilding sectors; restricting competition and choice; creating economic security risks from dependence and vulnerabilities in sectors critical to the functioning of the U.S. economy; and undermining supply chain resilience.”

The results of the investigation, which began during President Joe Biden’s administration, were announced last month.

The proposal is open for public comment until March 24, at which point the administration will determine whether or not to implement it.

Chinese reaction

On Monday, Chinese Foreign Ministry spokesperson Lin Jian sharply criticized the U.S. move.

“[T]o serve its political agenda at home, the U.S. has abused Section 301 investigation[s], which seriously violated WTO [World Trade Organization] rules and further undermined the multilateral trading system,” he said. “We call on the U.S. side to respect facts and multilateral rules and immediately stop its wrongdoings.”

The China Association of the National Shipbuilding Industry (CANSI) and China Shipowner Association had previously blasted the USTR investigation as being “conclusions full of lies and distortion of facts.”

In a statement issued when the results of the investigation were released, CANSI said, “Development of China’s shipbuilding industry strictly follows the international trading rules and is the result of collaboration with global partners, as well as the tech innovation, and the hard-wording and excellent performances of Chinese industry players.”

Complex new rules

The USTR proposal contains a number of complicated elements that made it unclear precisely how any new regime of port fees would be administered.

Each ship owned by a Chinese entity would be charged a $1 million fee on entering a U.S. port, though the proposal also appears to consider a different fee calculation of $1,000 per ton of capacity, which could add up to considerably more for large ships that carry thousands of tons of cargo.

Chinese-built ships operated by non-Chinese shipowners would be subject to a $1.5 million fee, which could be adjusted, depending on the percentage of Chinese-built ships in that shipowner’s fleet. This would apply even if the ship’s cargo was not manufactured in China.

Ships owned by companies that have existing orders for new ships pending with Chinese shipbuilders could be hit with an additional $1 million fee per entry at U.S. ports.

The rule also provides for “refunds” of a similar amount each time a shipping company sends a U.S.-built cargo ship into a U.S. port.

Economic justifications hazy

Mary Lovely, a senior fellow with the Peterson Institute for International Economics, said it was difficult to find an economic justification for the proposal.

“The thing that’s really disturbing is that it’s not linked to any particular policy that would benefit American businesses or consumers,” she said.

International trade will continue to flow to the United States, but through more convoluted routes that add time and expense. For example, Lovely predicted that many shipping firms would explore the possibility of diverting their ships to ports in Mexico and Canada, and trucking the cargo into the U.S.

“It seems to me that this is just a tremendous way to reduce volume and employment at U.S. ports and basically force trade to take transportation routes and transportation modes that are clearly going to raise prices for U.S. businesses and consumers,” Lovely said. “There’s no way around it.”

In an email exchange with VOA, Joe Kramek, World Shipping Council president and CEO, echoed those concerns.

“USTR’s proposed draconian $1 million-plus per U.S. port visit fees on ships that carry the large majority of the U.S. trade, if they are Chinese-built or –operated – or on any ship operator from any country that has even a single Chinese ship in its fleet or on order – if carried forward, would cause broad economic harm across all sectors of the U.S. supply chain,” wrote Kramek, whose organization represents shipping companies.

“The fees would result in fewer U.S. port calls, higher prices for U.S. consumers, and severe impacts for exporters, particularly American farmers,” he wrote.

Unlikely to benefit US shipbuilders

Though ostensibly aimed at helping U.S. shipbuilders, the law is unlikely to have a significant impact on that industry, said Marc Levinson, a Washington-based economist and historian who has written two books about container shipping.

“This is not likely to do much for U.S. shipbuilding,” Levinson told VOA. “U.S. commercial shipbuilders are very far away from global scale. They don’t produce anything that is competitive on the international market for commercial oceangoing vessels.”

“The winners of this policy would be Japan, Korea, the Philippines, other countries where commercial shipbuilding is on a larger scale today than the United States,” Levinson said. The losers, he added, will include U.S. consumers, as the port fees are passed on in the form of higher prices for imported goods.

In an email exchange with VOA, the National Retail Federation registered its opposition to the policy, writing, “NRF strongly opposes a port fee remedy, which will do nothing to force China to change its behavior and practices. It will only increase shipping costs for retailers and further disrupt the maritime market.”

Source: VOA

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