US port charges on China vessels add to supply chain uncertainty

Yahoo

24-02-2025

The Trump administration's proposal to assess massive port charges on Chinese-built and -operated cargo vessels is creating more questions than answers for the global maritime industry.
The proposal announced Friday by the United States Trade Representative (USTR) has its roots in a 2024 investigation that found China leveraged unfair trade practices to dominate the maritime, logistics and shipbuilding sectors.
The fees include:
Up to $1 million per call for a Chinese-operated vessel, based on a rate of $1,000 per net ton of capacity.
From $500,000 to $1.5 million per call depending on how many Chinese-built vessels are in an operator's fleet.
From $500,000 to $1 million per call for operators with vessels on order at Chinese shipyards.
There are also new ocean cargo preference rules which would immediately require 1% of U.S. exports move on U.S.-flagged and -operated ships, then 3% within two years, 5% within five years and 15% within seven years.
'What this does is inject chaos and uncertainty into the container shipping supply chain,' said John McCown, an analyst with the Center for Maritime Strategy. 'It's another form of tariffs, that's all it is, but with a bluntness that makes it even more nonsensical than tariffs.'
McCown said the proposal raises a host of complicated questions, such as whether a ship built in a country other than China, but drydocked there for repairs or maintenance, a common practice, runs afoul of the new rules. Or, how the fees will affect a China-linked bulk carrier or tanker that arrives empty to load American grain or crude oil for export.
'It doesn't appear as though the administration has really thought this through,' McCown said. 'What happens to an empty Panamax vessel that arrives to load grain from the Midwest? With the fees, we're suddenly less competitive than Brazil.'
'If the intention is to drastically increase costs for U.S. importers and make U.S. exports uncompetitive, this proposal is likely to do the job,' said consultant Lars Jensen of Vespucci Maritime, in a LinkedIn post.
Short term, there is speculation that carriers and shippers could divert to ports in Mexico and Canada where cargo would then move by rail to the U.S. But that scenario is also less clear-cut.
The key western Canada container ports of Vancouver and Prince Rupert in 2024 struggled to manage increased volumes, noted intermodal analyst Lawrence Gross, when shippers diverted container shipments away from the East Coast of the United States during longshore labor disruptions and from changes in vessel rotations during the Red Sea crisis.
'They've really suffered because of all the disruptions,' Gross said, 'and their share of inbound TEUs [twenty-foot equivalent units] is depressed right now. So there is some capacity there. The freight that's at risk is 'swing' freight — the divertable freight moving, for example, to the U.S. midwest. There's a variety of routing available such as choice of coast, choice of port region, for stuff that moves intact inland, such as [international] container moves.'
He estimated freight that could be diverted comprises a high-single-digit share of all U.S.-bound cargo. But Canada and Mexico may be less attractive as alternative ports if the U.S. goes ahead with previously announced tariffs on imports from those countries.
'If you take a ship with capacity of 14,000 TEU, that breaks down to 7,000 [40-foot] containers, [standard for international shipping], so the port fee will really account for a small percentage of the cost of goods delivered,' Gross said. 'The port fee impact is not something consumers are going to notice amid all the other things that are happening.'
McCown agreed, adding that the uncertainty triggered by the port fees likely has logistics planners already looking at diverting container shipments through Mexico and Canada.
'The supply chain works best when it's moving rhythmically,' he said. 'The whole process is incredibly efficient. For ocean lines, it's a 3% run-rate cost compared to the value of what's being shipped.'
McCown recalled that it took about six months until the impact of tariffs levied during the first Trump administration were felt in the container supply chain.
Ocean lines did not immediately respond to requests for comment.
The net effect of the port charges, like tariffs, Gross said, will be a braking effect on the economy.
'This will freeze everything: No investments will be made, no plants can be built, until this situation shakes down. We'll see it in a slowdown of the GDP. With interest rates where they are and inflation rates not changing, the downside risk is rising as we speak.'
Public comment is being accepted through March 24, after which President Donald Trump will decide whether to implement the proposal.
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