US port fees: Two out of three ain’t bad
If any industry knows all about about circumnavigation, it has to be shipping
The second version of the USTR proposals is still unfair and stupid. But not necessarily unworkable
THE first iteration of American plans to charge owners of Chinese vessels silly money to call at US ports was deeply unfair, economically stupid and entirely unworkable.
A charitable jury could just about acquit the revised version on the third count. And as the late Meat Loaf — a strong supporter of Donald Trump, incidentally — famously put it, two out of three ain’t bad.
Indeed, the second draft contains almost as many deliberate ambiguities as the tax rules in one of the world’s more conspicuously easy-going offshore financial centres. Savvier shipowners will have few difficulties devising workarounds.
At first there even seemed to be one obvious win. The idea of slapping the levy on non-Chinese operators that have any China-built ships in their fleets appeared to have been dropped.
Unfortunately, this blatantly daft proviso is set to return through the back door in the shape of the SHIPS for America Act, which was reintroduced on Wednesday.
That legislation also tables a scheme of cargo preferences, a retrograde step from any pro-free trade perspective. But we need to fight one battle at a time.
Otherwise, perspectives are largely favourable. The most obvious fee avoidance tactic on offer is to reshuffle your fleet like a new pack of cards at Friday night poker school.
Ensuring that fee-exempt ships that slid down the slipway at South Korean and Japanese yards are deployed on US operations while switching out Chinese tonnage elsewhere, should be a straightforward exercise.
There is a substantial incentive for doing just that. Non-Chinese operators of China-built ships will find themselves forced to shell out $180 per feu from next October. By April 2028, that will ratchet up to $340 per feu.
Still too many Chinese units to rejig your schedule? The trick here will be to dump the bill on the shipper, as carriers have done for decades by way of currency and bunker adjustment factors. Capacity will be in such short supply that you’ll probably get away with it.
Neither prospect will be available to Chinese government-owned Cosco, which naturally leans heavily on domestic shipyards for its newbuilding requirements.
Cosco isn’t a bit-part player. It is the world’s fourth-largest liner company, and an integral part of the Ocean Alliance, alongside its subsidiary OOCL, CMA CGM and Taiwan’s Evergreen.
The USTR mechanism has been expressly designed to put Cosco and OOCL at huge competitive disadvantages to rivals, and certainly delivers on that goal.
On Drewry’s reckoning, port fees for these operators will equate to $1,400 per feu in less than two years from now, which is over 50% of the current freight rate.
Pricing them out of US calls will entail fewer competitors; fewer competitors will entail higher prices and more limited options for US shippers. This helps nobody, but then again, the entire USTR strategy is blithely untroubled by any need for coherence.
Other significant backpedals include a ruling that China-built ships will be charged once per rotation rather than once per call, which again allows leeway for careful planners among us.
There is also an exemption for containerships of 4,000 teu or less. That leaves wriggle room for owners with feeders in this size bracket, although the unit-cost implications don’t bear thinking about.
A further deliberate gap lets vessels calling in the US from foreign ports within a range of 2,000 nautical miles off the charge, in deference to the important Great Lakes and the Caribbean trades.
The measure was designed to protect the minnows but could equally work to the advantage of the carp.
It should be viable for Chinese tonnage to drop off US-bound cargo at any convenient transhipment hub, then reload on to non-Chinese ships for the final leg.
In a related story this week, we looked at the ongoing confusion over whether ships funded through Chinese finance leases — and therefore Chinese special purposes vehicles — will be deemed as under Chinese beneficial ownership for fees purposes.
If you caught up in this one, contact a reputable law firm. They will gladly handle any restructuring needed to put the de jure situation in line with the de facto one for a very reasonable hourly rate.
We wish readers every success in exploiting the loopholes like a boss. Because let’s face it, if there’s any industry that knows all about circumnavigation, it has to be ours.
