The US Trade Representative's (USTR) proposal to fine Chinese-built ships calling on US ports would cripple trade flows and increase costs for US consumers rather than promote domestic shipbuilding efforts, according to comments from shipping industry participants.
Comments filed earlier this month from US industries that rely on shipborne cargo were critical of the USTR plan to fine owners of Chinese-built vessels between $500,000 and $1.5mn per port call, saying it would disrupt trade flows and increase US consumer costs. In more recent filings, the American Association of Port Authorities (AAPA), shipbrokers and major shipping associations, among others, echoed those concerns, calling on the USTR to reconsider its proposal ahead of a public hearing the USTR will host on 24 March.
The AAPA commended USTR's goal of revitalizing the US' domestic maritime industry, but warned that the proposed fine on Chinese-built ships would not have a positive impact on US shipbuilding efforts.
"The fees will do little to grow the American shipbuilding industry, which needs major infusions of capital, workforce talent and innovation to begin competing with shipbuilders abroad," the AAPA said. Existing shipyards in the US are working at or near capacity, so higher demand will not enable them to produce additional ships with the "same number of resources", according to AAPA.
The proposed fines would disrupt the efficient and cost-effective flow of essential goods to the American cities and industries, shipbroker Lightship said in its comments to the USTR proposal.
"If the US were to tax Chinese vessels, then Japanese vessels and shipyards would be the directly benefited party, not the eventual US shipyards," the shipbroker said. A $1mn fee on Chinese vessels calling on US ports would be an effective $20/t surcharge on the 50,000t-sized cargoes common in the Supramax dry bulker segment that delivers critical cargoes to the US, Lightship said, such as the rock salt that de-ices roads along the US east coast.
"The salt producer and seller will subsequently raise the price per ton of salt to offset these higher freight costs," Lightship said.
Fees on Chinese vessels would split the global freight market into US-focused and US-avoidant shipping segments, according to major international shipping agency BIMCO, while the additional costs would be "passed on to the US consumer".
"The totality of the world fleet would not change, but the overall cost of maritime trade would increase due to less competition in the now segregated US market," BIMCO said. "In this regard, it is worth keeping in mind that the US import/export is about 12pc of global seaborne trade, so the consequences of reorganizing maritime trade will have a much bigger impact on US import/export than on trade in the rest of the world."
The threat of the proposals being instituted under US president Donald Trump's administration contributed to a nearly 20pc increase in freight rates last week for dry bulk vessels loading out of the US. The rise was notable for early signs of a bifurcation developing in US exports, as vessel operators without Chinese vessels in their fleet submitted higher $/d offers for US-loading cargoes compared to operators utilizing Chinese vessels in their fleet.
