USTR Proposes Section 301 Remedies of $1 Million Docking Fees
The U.S. government is considering charging fees ranging from $500,000 to $1.5 million each time a ship docks at a U.S. port, with higher fees charged when Chinese vessels enter; South Korean or Japanese-built ships wouldn't avoid the fees, however, as the Office of the U.S. Trade Representative seems to have taken earlier criticisms into account that global shipping companies would own just as many Chinese ships but use them at other destinations.
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If a Korean or Japanese ship docked at a U.S. port, it could still have to pay $1 million if the carrier that owned the ships had Chinese-built ships for at least 50% of its fleet, or if its order book was at least half to Chinese shipyards.
There would be an opportunity for shippers with Chinese ship-dominated fleets to receive refunds of these fees if they were serving the U.S. with a U.S.-built ship. (According to the government, there are 185 U.S.-flagged ocean-going cargo ships with at least 1,000 tons capacity.)
The highest fees would be on Chinese-built ships.
It's not clear how many of these fees might end up layering on top of each other. Conceivably, one could have a $1.5 million fee for bringing a Chinese ship, plus a $1 million fee for being a Chinese firm, plus a $1 million fee for having a majority of your ships Chinese-built, plus a $1 million fee for having a majority of orders for future ships.
Or, you could have a $750,000 fee for a European shipping company with a Korean ship, for having 25% to 50% of your fleet as Chinese ships, and another $500,000 fee if you had a contract to buy at least one ship in the next two years from China.
The Federal Register notice says that "appropriate and feasible action may include one or more" of the options it lays out, including requirements for some proportion of U.S. exports to use either U.S.-flagged or U.S.-built ships. The notice has not yet been published, but was made public after 6 p.m. EST on Feb. 21.
USTR will hold a public hearing on the proposed actions March 24, and the deadline to request to appear there is March 10; comments are due by March 24, and can be submitted at https://comments.ustr.gov/s/. The docket number for written comments and rebuttal comments is USTR-2025-0002. The docket number for requests to appear is USTR-2025-0003.
The Section 301 investigation was initiated after a request from shipbuilding and metal unions during the Biden administration (see 2404170029); that request suggested a $1 million docking fee.
The report said that China decided it wanted to dominate in shipbuilding and logistics, and has gone from 5% of global tonnage in 1999 to more than 50% in 2023. Chinese companies own 19% of the commercial fleet worldwide. It said that kind of dependence is risky for the U.S.
USTR said it is asking commenters to offer opinions on "whether the proposed fees or restrictions on services are appropriate, including the type of services to be subject to fees or restrictions, the level of fees or restrictions, the structure of any fees, restrictions, or reimbursement of fees on services. In commenting on proposed actions, USTR requests that commenters specifically address whether a proposed action would be practicable or effective to obtain the elimination of China’s acts, policies, and practices."
Peter Harrell, a former Biden White House supply chain resilience strategist and sanctions expert, posted on LinkedIn that this notice is at least as big a deal as the changes to investment screening also announced Friday evening, Feb. 21.
He wrote: "If this comes into effect, it will very likely provide strong incentives for international shipping lines to use Japanese and Korean shipyards, as well as incentives for U.S. shipbuilding. It'll also be interesting to see how operators try to game the system through complex corporate form and ownership transactions ... something many shippers are already adept at. Plus, we have to expect that it will drive up shipping costs to and from the U.S., though likely at rates that, while being noticed by industry, are not specifically felt by U.S. consumers."
He estimated that a $1 million docking fee would add up to $50 per container, against a current shipping cost of $2,000 for East Asia to the West Coast.
Last year, World Shipping Council CEO Joe Kramek testified on the impact of a $1 million shipping fee as the administration was considering whether to find that Chinese support of its shipbuilding sector was a burden to U.S. commerce. He said then that $1 million would cost almost $350 per 40-foot container, and that if the ship made several port calls on its route -- say, Long Beach, Oakland and Seattle, or New York, Baltimore and Savannah -- it would get charged each time (see 2405290066).
Kramek suggested the end result could be either that carriers would shift business to ports in Canada and Mexico and/or carriers that own more Chinese vessels could withdraw from the U.S. market, which would reduce competition and raise freight rates.
Vespucci Maritime CEO Lars Jensen posted on LinkedIn that the proposal left him "somewhat speechless."
Jensen, who is based in Copenhagen, said, "The economic burden on US exporters and importers will be huge." He added, "If the intention is to drastically increase costs for US importers and make US exports uncompetitive, this proposal is likely to do the job."
The intention is to create economic incentives to benefit the U.S. cargo shipbuilding industry and allied countries' shipbuilding industries, and to provide a counterweight to China's intervention in its shipbuilding market; and, at least nominally, to convince China to stop subsidizing its shipbuilders and logistics industries.