Proposed U.S. Port Fees on China Ships Already Hitting Ag Exports

By Ryan Hanrahan

Reuters Lisa Baertlein, Karl Plume, and Timothy Gardner reported Wednesday that “President Donald Trump’s plan to revive U.S. shipbuilding using massive fees on China-linked ship visits to American ports is causing U.S. coal inventories to swell and stoking uncertainty in the embattled agriculture market, as exporters struggle to find ships to send goods abroad.”

“Trump is drafting an executive order that would rely on funding from a U.S. Trade Representative proposal to levy fines of up to $1.5 million on China-made ships or vessels from fleets that include ships made in China,” Baertlein, Plume, and Gardner reported. “Those potential port fees have limited the availability of ships needed to move agriculture, energy, mining, construction, and manufactured goods to international buyers, according to major U.S. exporters and transportation providers in interviews with Reuters, letters to U.S. officials, and comments ahead of USTR hearings next week.”

“Vessel owners have already refused to provide offers for future U.S. coal shipments due to the proposed USTR fees, Xcoal Energy & Resources CEO Ernie Thrasher said in a letter to U.S. Department of Commerce Secretary Howard Lutnick dated March 12 and seen by Reuters,” Baertlein, Plume, and Gardner reported. “…The letter from Pennsylvania-based coal marketer Xcoal and comments from agriculture representatives showing tangible impacts from the proposed fees have not previously been reported.”

What Are the Proposed Fees?

Troutman Pepper Locke reported that the Trump administration’s proposal includes “a service fee [that] will be imposed on vessel operators from China, requiring payment of up to $1 million per entry into a U.S. port or up to $1,000 per net ton of the vessel’s capacity. In practice, most ships are expected to incur the maximum $1 million fee per port call. If a vessel makes multiple stops at U.S. ports, the operator will be required to pay this fee for each entry.”

In addition, “a service fee of up to $1.5 million per port call will apply to any operator with a vessel constructed in China or a fleet that includes such vessels, regardless of their flag or operator nationality,” Troutman Pepper Locke reported. “Even if a specific ship was not built in China, its operator may still be subject to the fee based on the overall composition of their fleet.”

“The amount assessed is proportional to the percentage of Chinese-built ships within the fleet,” Troutman Pepper Locke reported. “For instance, operators whose fleets consist of at least 50% Chinese-built vessels will face a fee of up to $1 million per vessel for each U.S. port entry. Those with 25–50% Chinese-built vessels will be charged up to $750,000 per entry per vessel, while operators with less than 25% Chinese-built ships will pay up to $500,000 per vessel per entry.”

How the Proposed Fees Could Impact U.S. Agriculture

Baertlein, Plume, and Gardner reported that “U.S. farmers, who are already getting pummeled by retaliatory tariffs from China, Mexico, and Canada, also are caught in the crossfire of the Chinese ship fee fight, the American Farm Bureau Federation said.”

“The inability to secure ocean freight transportation from May and beyond has restricted their ability to sell bulk U.S. agricultural products like corn, soybeans, and wheat because exporters are unsure what the final cost would be, three U.S. grain export traders told Reuters,” Baertlein, Plume, and Gardner reported. “…Bulk agricultural exporters could face an additional $372 million to $930 million in annual transportation costs from the fees, the Farm Bureau said. That would represent substantial margin loss in global markets where competitiveness is often determined by mere pennies per bushel.”

Progressive Farmer’s Mary Kennedy reported that “Jay O’Neil, HJ O’Neil Commodity Consulting, said in an email, ‘As for the USTR 301 two-tiered proposed $1.0 million to $1.5 million USD tax on Chinese vessels visiting U.S. ports, that is very misguided and troubling for U.S. consumers and U.S. grain farmers. In 2022, over one-third of all commercial vessels were built in China, and that percentage is quickly rising to over 55%. If it becomes more expensive for these ships to serve U.S. ports, the added expense will definitely be passed on to U.S. consumers.’”

“O’Neil said, ‘A $1 million or $1.5 million USD tax on a 60,000 metric ton export grain vessel would equate to a freight rate increase of $16.67–25.00 per metric ton. In turn, much of this cost would be passed back to the U.S. farmer,’” Kennedy reported. “‘And, of course, it would encourage increased exports from South America and Black Sea. Any time you economically shrink the available pool of flagged ships available for service to U.S. ports, you increase freight costs and disadvantage U.S. consumers and farmers.’”

“U.S. grain exports would become less competitive and farm prices would suffer,’” Kennedy reported. “‘Just as it was with past grain embargoes, the U.S. government would be encouraging, if not indirectly funding, crop expansions in lands of our foreign competitors.‘”

Proposed U.S. Port Fees on China Ships Already Hitting Ag Exports was originally published by Farmdoc.