Comments sent to the office of the United States Trade Representative (USTR), in advance of a public hearing taking place this week on Monday, March 24 and Wednesday, March 26, regarding the USTR’s Section 301 China’s Targeting of the Maritime, Logistics, and Shipbuilding sectors for Dominance, appeared to collectively pushback on the USTR’s proposals.
As previously reported, the USTR issued an announcement on February 21, regarding a proposal that would charge Chinese-owned ships up to $1 million per entrance and Chinese-built vessels charged $1.5 million per entrance.
The impetus for these fees, according to a Federal Register notice, is “China’s targeting of the maritime, logistics, and shipbuilders’ sectors for dominance is unreasonable because it displaces foreign firms, deprives market-oriented businesses and their workers or commercial opportunities, and lessens competition, and creates dependencies on China, increasing risk and reducing supply chain resilience.” And the USTR added that China’s global shipbuilding market share increased from less than 5% in 1999 to more than 50% in 2023, while also increasing China’s ownership of the commercial world fleet to more than 195 as of January 2024, and controlling production of 95% of shipping containers and 86% of the global supply of intermodal chassis, among other components and products.
USTR also stated that China’s targeting of the shipbuilding sector for dominance is hindering any public or private efforts to revitalize the U.S. shipbuilding industry, adding that U.S. companies are severely constrained to compete for business in the global recapitalization of the commercial fleet and also that low-priced Chinese ships, which result from China’s targeted dominance, are among the constraints U.S. companies face to compete for business.
The proposed fees also target companies with Chinese shipbuilding orders. Operators with at least 50% of their new vessel orders in China could be charged an additional $1 million per U.S. port call. The measures are part of a broader effort by the Trump administration to curb China’s dominance in the maritime sector, which now accounts for more than 50% of global shipbuilding.
These fees are intended to counter China’s dominance in shipbuilding and maritime logistics. However, industry experts caution that such measures may lead to increased costs for U.S. importers and exporters, as well as potential disruptions in global trade.
China’s government has pushed back, calling the proposal unfair. The Ministry of Commerce said, “The U.S. is still going its own way and going further and further on the wrong path.” Officials argue that the fees won’t strengthen American shipbuilding but will instead increase transportation costs and inflation.
In comments submitted to the USTR, Oscar Feldenkreis, CEO of Perry Ellis International, an American clothing, fashion, cosmetics and beauty company, made it clear that his company strongly opposed the USTR’s proposed actions and called on the USTR to withdraw the proposed port fees, noting that these measures will cause substantial harm to American businesses, workers, and consumers.
“The proposed port fees-up to $1.5 million per port call-will significantly raise the cost of our imported goods,” stated Feldenkreis. “Unlike exporters who can seek alternative markets, U.S. importers rely on efficient and cost-effective global shipping networks to maintain stable supply chains and keep consumer prices in check. These fees will force ocean carriers to either pass the cost onto importers like us through increased freight rates or reduced service to U.S. ports altogether. The results will be higher costs for businesses and ultimately, for our American consumers who rely on imports for everything from raw materials to finished goods, disruptions to established shipping routes will create further challenges. Carriers facing these exorbitant fees are likely to reduce the number of Port calls at key entry points for us, such as Savannah, Charleston and Miami, while concentrating operations in only a few high-volume ports like Los Angeles, New York, and Houston. This shift will cause congestion, increase port in inland transportation cost, and lead to severe delays in the movement of our goods.”
Feldenkreis also noted that delays in shipments, due to fewer port calls and higher shipping costs will force businesses to either carry excess inventory, which ties up capital and warehouse space, or run the risk of facing stock shortages that can disrupt operations and sales.
Comments collectively submitted by the National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) opposed the USTR’s proposed actions on two fronts: they are unlikely to eliminate the Chinese government’s unfair practices; and if implemented, it would have serious ramifications on U.S. competitiveness, supply chain efficiency, and economic security, adding that U.S. businesses of all sizes and American consumers would be at the greatest risk of economic injury. And they also stated that alternative tools are available, for Congress and the Executive Branch, to directly revitalize the U.S. shipbuilding industry, including grants, tax-exemptions, and sector-specific regulations.
Lary Gross, president of Gross Transportation Consulting, explained that should the USTR’s proposals eventually come to fruition, it could be highly disruptive.
“To say that the U.S. is going to start producing these large cargo ships is a total fantasy,” he said. “Even just to develop the capacity of the shipyards in order to correct this situation and develop and put into place American built ships would take a decade or more. It really is a question as to what this is going to accomplish, other than adding a lot of cost and a lot of disruption.”
On a more immediate note, he said that the proposed fees would create a competitive advantage for western Canadian ports versus Pacific Northwest U.S. ports, with volume being diverted up to Prince Rupert and Vancouver, and away from places like Oakland, Seattle, and Tacoma, coupled likely with a similar situation on East Coast, with cargo being diverted towards Canadian ports that will not be seeing those kinds of fees.
“You’re not going to see as many port calls being executed by these carriers, because every time they pull into the port, it’s another $1 million,” he said. “If you currently have a string that makes three or four port calls on the East Coast, starting in Savannah, and then goes to Charleston, Norfolk, and then Baltimore or New York, that’s not going to happen under this new scenario, because each time you add a port to the string, it’s another $1 million. You will see a lot of consolidation of port calls into the major ports, and the secondary ports are going to suffer, and that’s going to cause a lot of requirements for repositioning drayage and potentially north-south intermodal in order to make up for all of this. Ports that will be the load center ports will become very congested, because there’ll be a lot more volume trying to flow through those keyholes, whereas some of the secondary ports, I think, will be very hungry for volume. A lot of disruption going to come out of all of this. And I’m not sure really what the what the net gain will be, because the ability for the carriers or the ship builders or the shippers to react to this is extremely limited.”
