The United States is preparing to impose substantial fees on ships associated with China, aiming to revitalize its struggling domestic shipbuilding industry and counter China’s growing dominance in global maritime trade. A draft executive order proposes levying fees on vessels docking at U.S. ports if they are part of a fleet that includes Chinese-built or Chinese-flagged ships. Additionally, the U.S. plans to encourage allied nations to implement similar measures, with the possibility of retaliatory actions against those that refuse to comply.
Countering China’s Shipbuilding Dominance
This initiative comes in response to China’s significant expansion in shipbuilding, which has seen its share of global merchant vessel cargo capacity grow from 5% in 1999 to over 50% today. This expansion has often come at the expense of shipbuilders in countries such as Japan and South Korea. Meanwhile, the U.S. shipbuilding sector, which peaked in the 1970s, now accounts for only a minimal portion of global output.
Proposed Fee Structure and Regulations
The proposed fees are expected to impact major global shipping companies, including China’s COSCO, Switzerland’s MSC, Denmark’s Maersk, and Taiwan’s Evergreen Marine, as well as operators transporting bulk commodities and automobiles. The fees could reach as high as $1.5 million per port call, significantly affecting the operations of shipping companies with Chinese-built vessels in their fleets.
Additional details from the draft executive order and related proposals include:
- Flat Fee for Chinese-Built Vessels: A charge of up to $1,500,000 per port call for any Chinese-built vessel entering a U.S. port.
- Tiered Fees Based on Fleet Composition:
- Fleets with over 50% Chinese-built vessels may face fees up to $1,000,000 per port call.
- Fleets with 25-50% Chinese-built vessels may incur fees up to $750,000 per call.
- Fleets with less than 25% Chinese-built vessels may be charged up to $500,000 per call.
- Fees Based on New Orders: Operators with shipbuilding orders in Chinese shipyards might face additional fees of up to $1,000,000 per port call, depending on the proportion of their order book in China.
- Incentives for U.S.-Built Vessels: Shipping companies using U.S.-built vessels could receive refunds of up to $1,000,000 per port entry.
- Mandatory U.S.-Flag Shipping Requirements: The proposal includes a phased requirement for increasing percentages of U.S. exports to be transported on American-flagged vessels. This mandate would start at 1% and rise to 15% within seven years, with specific allocations for U.S.-built ships.
- Restrictions on China’s LOGINK Platform: The proposal suggests potential restrictions or bans on the use of China’s LOGINK logistics platform in U.S. ports due to concerns about sensitive data access.
Industry Reaction and Potential Consequences
These measures reflect a bipartisan effort to reduce China’s influence in global shipping and strengthen U.S. naval readiness. However, they could also have significant economic repercussions. For example, MSC CEO Soren Toft has suggested that his company may reduce the number of U.S. port calls to mitigate the financial impact of the proposed fees.
Additionally, the shipping industry has raised concerns that the new fees could disrupt supply chains and lead to increased costs for consumers. It is reported that Chinese-built vessels make up 32% of the global container fleet, and all ten of the world’s largest ocean carriers have at least some Chinese-built vessels in their fleets. There is also the possibility of retaliatory measures from China, which could further strain global trade relations.
The financial implications could be severe. The added fees could potentially add up to $3 million per voyage, which would account for a significant portion of the revenue for each journey. These costs will ultimately be passed on to the importers or exporters, and will trickle down to higher costs of all goods that rely on any imported materials during their production.
Despite these risks to manufacturers who depend on these supply chains, the U.S. government views the plan as a necessary step to counteract China’s dominance in shipbuilding and to reinvigorate the American shipbuilding sector. The USTR will hold a public hearing on March 24, 2025, at the International Trade Commission to discuss these proposed measures. Public comments are being accepted until March 24.