Controversial Plans to Tax Chinese-Built Tonnage at US Ports Spark Outcry

Public comments continue to fly into the US Trade Representative (USTR) ahead of Monday’s hearing into controversial plans to tax Chinese-built tonnage calling at US ports.

In the more than 150 submissions sent in, a considerable number have hit out at the unfair, blanket nature of the penalties for container shipping in particular.

The trade office has recommended potential fees of up to $1.5m per port call for Chinese-built vessels, $1m per port call for operators of Chinese-built ships, and mandatory US-flag shipping requirements.

Most operators in the world have in their fleet one or more ships of Chinese origin meaning that when calling at a US port, they would be subject to a port fee.

Industry Concerns

Captain Melwyn Noronha, the CEO of lobby group Shipping Australia, pointed out that the blanket charges will penalise smaller containerships far more, suggesting a per teu fee rather than the current plans for a charge per ship.

In his submission, John McCown, a container shipping veteran who now runs New York-based Blue Alpha Capital, outlined what fees would be for a Chinese COSCO ship in a transpacific service. A weekly service from Asia to the west coast can be accomplished with five ships on a 35-day voyage turn.

Various other submissions made to the USTR have pointed out that the penalty fees in their current form would potentially cause lines to rationalise the quantity of calls to the detriment of the smaller ports, and similarly drive more ships to call in Canada and Mexico.

Potential Impact

Hapag-Lloyd chief executive Rolf Habben Jansen expressed concerns about the massive extra costs that all shipping lines would face if the proposed actions were implemented.

There is also a chance that courts might try and bar the USTR and president Donald Trump from carrying out their plan to penalise Chinese-built tonnage. In 1998, the US Supreme Court ruled unanimously that a harbour maintenance fee was in fact a tax and not a user fee and that it was unconstitutional to apply it to exports.

Conclusion

The repercussions of the proposed penalties on Chinese-built tonnage at US ports are significant and have sparked widespread concern within the industry. As stakeholders await the outcome of the USTR hearing, the future of container shipping operations in the US hangs in the balance.

Splash will be reporting on the deliberations from the USTR hearing and the Trump administration’s response next week.