BIMCO, the world’s largest shipping organization, and the American Association of Port Authorities (AAPA) have added their voices to the rising chorus of maritime stakeholders strongly opposing the Trump administration’s proposed fees on Chinese-built vessels that could attain an additional $3.5 million per port call if fully implemented.
Stakeholders were invited in February by the United States Trade Representative (USTR) to offer feedback on measures targeting Chinese dominance in time for a public hearing scheduled for March 24. An implementation date was not specified.
“The proposed actions will impose much increased transport costs on US imports and exports and have negative effects on the wider US economy; their impact on Chinese dominance is much less certain,” said BIMCO deputy secretary general Lars Robert Pedersen in a statement. “The ships already built of Chinese origin will not disappear from the world fleet if the proposed port fees are introduced.”
Mr. Pedersen predicted a splitting of the global shipping market into two halves. Some shipowners would assemble fully non-Chinese fleets in order to avoid penalties while calling at U.S. ports. Others would use Chinese tonnage to serve the rest of the global market, without making port calls in the U.S., and at lower price. “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 is the largest direct entry membership organisation in the shipping industry representing almost 2,100 members and 63% of the global merchant fleet, measured by deadweight tonnage.
“For decades BIMCO members have contracted the construction of new ships in a competitive international market where Asian shipyards have taken an increasing market share, particularly in China in recent years,” Mr. Pedersen noted, adding: “Due to the very competitive nature of the international shipping market, the increase in cost-effective ships of Chinese origin has resulted in comparatively lower costs for maritime transport positively supporting world trade and global economies, including the United States of America.”
Mr. Pedersen continued: “While a macro analysis points towards avoidance, some sectors are more adaptive than others. In this regard the container shipping sector with relatively few, very large operators may be less prone to market segmentation and rather seek to minimise the number of port calls in the US per ship. This will inevitably lead to port congestion, trade flow chocking and increased inland re-distribution need. Fewer port calls will also have negative impact on port jobs with some ports becoming potentially unattractive for foreign trade.
“Higher transport cost for US imports of raw materials will, due to such commodities’ relative low value, be impacted much more than higher value import goods. This effect runs counter to other stated objectives of the US Administration, such as increasing production domestically with its associated need for more raw materials.
Mr. Pedersen further stated: “Whether or not a requirement to carry US export on US built, US flagged ships in the future is realistic is beyond the scope of these comments. US shipbuilding has not been competitive6 for a long time, witnessed by the lack of US built tonnage in the world fleet. However, we note that if it is required to carry US export on US built, US flagged tonnage, and that such tonnage is becoming available, the transport cost would increase significantly and impact US export’s competitiveness on the world market. This is especially true for low value commodities such as grain and soy.”
AAPA sees little positive impact for American shipbuilding
For his part, AAPA president and CEO Cary Davis opined that the fee structure would do little to counter China’s dominance in shipbuilding, and neither would it have near-term positive effects on domestic shipyard production. “A fee on foreign vessels will simply not bring back American shipbuilding. Our existing shipyards are working at or near capacity, and higher demand for American vessels will not enable them to produce more ships with the same resources,” Mr. Davis said, recalling AAPA’s support for alternative support policies like the SHIPS Act.
The AAPA participated in a multi-industry study to assess the impact of the fees, conducted by Trade Partnership Worldwide. The initial results suggest a double-digit decline of American agricultural and merchandise exports because of the increased cost of shipping
In addition, as written, the plan would likely reduce traffic to smaller secondary ports, AAPA affirmed, and would risk squandering federal investments in channel deepening and port infrastructure in midsize seaports on the Gulf and East Coasts.
Thus, the association concluded: “AAPA respectfully urges the Office of the United States Trade Representative (USTR) to reconsider its approach to countering Chinese dominance in the global shipbuilding industry by narrowing the scope of the proposed fees or reversing course.”
(Photo of the Port of Los Angeles)