The U.S. government is facing growing opposition over its plans to introduce steep fees targeting Chinese-linked ships entering American ports, with global shipping bodies and industry experts slamming the proposals as “disruptive” and counterproductive. The comments came as the Office of the United States Trade Representative (USTR) held two days of public hearings in Washington over the policy, which would impose charges of up to USD1.5 million per port call for any shipping operator with Chinese-made vessels in their fleets or new building orders with Chinese shipyards. USTR has claimed the port fees, which it first proposed in February, are necessary to protect America’s national security and combat the dominance of China’s shipbuilding industry, which the USTR judges to be built on unfair government subsidies. But the idea has sparked intense criticism from within the shipping industry, with insiders arguing the fees will harm the competitiveness of America’s own maritime sector while failing to curtail China’s lead.
“If implemented as proposed, it will be an extremely large disruptive event for shipments to and from the U.S., and with ripple effects which will subsequently be felt also in non-U.S. trades,” said Lars Jensen, CEO of industry consultancy Vespucci Maritime. During the first day of the hearings on March 24, representatives from several maritime groups – including two Chinese industry associations – urged policymakers to rethink the proposal and pursue a more effective approach to reviving America’s shipping industry. The China Association of the National Shipbuilding Industry (CANSI), represented at the hearing by its Secretary General, Li Yanqing, described the proposed port fees as “erroneous and inoperative” in its testimony. CANSI insisted it was open to U.S. efforts to revitalize its shipbuilding sector, and that China could even be a potential partner in this process. But the U.S. was simply using its accusations against China as an “excuse” to impose port service fees on global shipping companies, the Association argued.
The China Shipowners’ Association (CSA), which had four representatives at the hearing, said the proposed actions targeting Chinese-built vessels and Chinese shipping companies directly infringed upon China’s status as a “most-favored nation” under World Trade Organization (WTO) rules. The CSA also alleged the proposal was in direct contravention of the 2003 Sino-U.S. Maritime Agreement, particularly Article 6, which stipulates that vessels from the two countries shall receive fair and non-discriminatory treatment regarding port access, services and fees when calling at each other’s ports. “The decline of the U.S. merchant fleet predates the rapid development of China’s shipping industry,” the CSA said in its comment.
Joe Kramek, President of the World Shipping Council (WSC), stated that the WSC “strongly opposes” the USTR’s port-fee plan. Though a revitalization of the U.S. maritime sector would be very positive, the introduction of “backward-looking, retroactive fees on shipping companies” would be unlikely to achieve this, Kramek said, adding that USTR should work with stakeholders of all types to develop “practical and thoughtful ways” to achieve its goals. The proposed fees would raise costs for shipping companies by millions of dollars per voyage, as container vessels serving the U.S. market typically call at three to four ports in the country per trip, according to Kramek. Shipping companies with China-made vessels would have to pay a USD1 million to USD1.5 million fee each time they enter a U.S. port. About 98% of all U.S. port calls could be subject to the charges, which would amount to an additional tax on American consumers of up to USD30 billion annually, according to WSC estimates. The damage to U.S. imports and exports would be significant, and jobs and businesses that rely on ports would also be affected, Kramek added.
Kramek pointed out that there were currently only 30 U.S.-built container ships active, with an average age of 24 years – meaning most are near the end of their typical lifespan of 20 to 30 years. The U.S.’ ability to quickly build and flag a larger fleet is also severely limited by a lack of shipbuilding labor and certified mariners, he added. Therefore, “the proposed requirements for exportation on U.S.-built and U.S.-flagged vessels, if applied to container ships, would not be realistic for many years into the future”, Kramek said.
The Baltic and International Maritime Council (BIMCO), another leading global shipping association, warned of the risk of a segregated U.S. market, as operators may reallocate their fleets to avoid the port fees. U.S. imports and exports account for about 12% of global seaborne trade, so any reorganization of maritime trade would have a much larger impact on the U.S. than on the rest of the world, while “their impact on Chinese dominance is much less certain”, BIMCO said in a letter to the USTR.
American business groups have also voiced opposition to the proposals. The National Retail Federation and the Retail Industry Leaders Association submitted joint comments to the USTR, warning that the proposal’s harmful effects would ripple across the national economy. “U.S. businesses and consumers will take the brunt of these service charges and be forced to bear increased costs,” the South China Morning Post reports.
