Recent announcements by the Trump administration have struck fear into the shipping and global supply chain world. Most have been about tariffs, which at the time of writing this article, have mostly been paused, whilst the steep tariffs on China, which caused a recent drop-off in blue water container bookings of 60% between the two countries, are now subject to further discussions.
The one regulation that is likely to cause the most damage to global shipping is the U.S. Trade Representative (USTR) Section 301. The USTR regulation, while scaled back from its earlier proposal (such as the US $1M-US$1.5M flat fee per port entry for operators with a large share of Chinese-built vessels), is aiming to curb China’s dominance in the maritime sectors and boost American shipbuilding.The regulation will be introduced in two phases.
The first phase begins with a 180-day grace period during which no fees will be charged. Afterwards, the USTR will implement fees on Chinese vessel owners and operators based on net tonnage of vessel capacity per US voyage. The fee basis will be US$50 per net ton, increasing annually over three years in US$30 increments each year, to US$140 per net ton in 2028. The fee will be assessed on the first point of entry per rotation/string and is capped at five assessed fees per year. The fees will also be applicable on a “non-discriminatory basis,” meaning fees will also apply to operators using Chinese-built vessels, regardless of the operator’s nationality, at a lower rate. For example, for non-Chinese operators of China-built vessels, fees will be assessed at a rate of US$18 per net ton or US$120 per discharged container, whichever is higher. Rates will also increase incrementally by US$5 per net ton until 2028, maxing out at US$33 per net ton or US$250 per container discharged. This fee will also be charged up to five times per year, per vessel. The first phase also includes a phased service fee targeting foreign-built vehicle carriers, assessed based on a vessel’s Car Equivalent Unit (CEU) capacity. After the 180-day grace period, the fee will be set at US$150 per CEU. The port fees will not be applicable to vessels under 4,000 TEU.
Phase two will focus on the LNG sector, requiring a portion of US LNG exports to use US-built vessels, starting April 2028. However, the requirement will phase in over 22 years to give industry time to adjust as the US currently lacks the LNG shipbuilding capacity and expertise.A feature of the final determination is the fee remission pathway, offering operators a temporary suspension of service fees for up to three years if they commit to purchasing U.S.-built vessels of equivalent or greater size. However, stakeholders have expressed concerns about current limitations in U.S. shipyard capabilities.
Currently, it is estimated that over 56% of all general cargo imports and some 90% of project cargo into the US arrives on China-built vessels. COSCO Group, the world’s fourth-largest liner group would be the hardest hit as it, and its sister company OOCL, have a major presence in the Asia-US trades. Both are members of the Ocean Alliance, with CMA CGM and Evergreen and the port fees are expected to cause major headaches for the Alliance. It could even lead to destabilising shipping alliances, and some might even fall apart. It is expected that the fees will encourage US importers and exporters to avoid using vessels affected by the fees, however this might not be possible due to the lack of available and suitable tonnage. In the end, shipping lines might just pass on the additional cost to the cargo owners and – ultimately – consumers and exporters.
The USTR is also proposing duties of up to 100% on Chinese ship-to-shore cranes, containers and other container-handling equipment. Gene Seroka, executive director of the Port of Los Angeles, has stated that this could cause serious problems for marine terminal operators as most of this type of equipment is not available in the US and other manufactures outside China would not be able to scale up quickly enough to fill the vacuum.
Trump, after meeting the CEOs of Walmart, Target and Home Depot who told him that shelves in their stores could soon be empty, seems to have toned down his rhetoric on Chinese tariffs. However, as most shipping lines are not based and owned in the US, he probably cares less about the effect it would have on them and will be less inclined to change his tune on the proposed USTR regulations. But Trump being Trump, anything is possible!
