The U.S. Trade Representative’s proposal to slap heavy port fees on Chinese-made vessels arriving at American ports and use the funds to rebuild the domestic shipbuilding industry ran into rough waters at a public hearing this week in Washington.
Many leaders in the U.S. maritime industry told the agency at the hearing and in letters that the plan could hurt rather than help other sectors of the domestic industry, as well as cause major and costly disruptions to maritime shipping and global trade.
At issue is a set of recommendations announced Feb. 27 by the USTR in response to a petition filed in March 2024 by five labor unions seeking to boost U.S. steel production and jobs. It claimed that China was implementing policies and practices that bolstered their shipbuilding industry while intentionally disadvantaging shipbuilding in the U.S.
The USTR launched a Section 301 Investigation under the Trade Act of 1974 of “China’s Targeting of the Maritime, Logistics and Shipbuilding Sector for Dominance,” and during the final days of the Biden administration released a report citing strong reason to believe that China intends to dominate world shipbuilding at the detriment of the United States.
China is the largest shipbuilder and USTR estimates its share of the commercial market grew from less than 5% in 1999 to more than 50% in 2023, while the U.S. industry remains tiny and focuses mostly on military ship construction.
Proposed actions include imposing fees of up to $1.5 million on ships arriving at U.S. ports that are Chinese built, operated or flagged, and assessing fees on vessels manufactured elsewhere if they are operated by carriers with fleets that include Chinese-made vessels.
Many ocean vessels are made in China but are owned and operated by non-Chinese companies, and there is a lack of non-Chinese built vessels in the dry and bulk liquid sectors, especially for certain chemicals and LNG, which require specialized expertise not yet available in U.S. shipbuilding, according to the Chamber of Shipping of America (CDA).
CSA estimates that the port fees could double or triple shipping costs for U.S. imports and exports, and would impact 83% of container ships, 68% of car carriers and 46% of chemical tankers calling at U.S. ports.
The plan further requires that an escalating percentage of U.S. exports every year be carried on vessels owned by U.S companies and registered in the United States, reaching 15% of U.S. goods by the end of seventh year after the plan’s enactment. Critics say this timeline would be extremely difficult to meet given the small capacity of U.S. shipbuilding to take on new orders, and the time needed to establish or expand yards, train workers and construct ships.
Lining up against the fee proposal and urging USTR to drop or rework it are an array of maritime interests. They include port authorities, particularly in the South and along the Gulf Coast, the American Waterways Operators, shipowners in the United States and Asia, carriers in the Great Lakes, soybean, coal, petroleum, footwear and clothing exporters who move their products by ship, and a group of maritime college grads and dry cargo professionals worried that new regulations and trade restrictions will discourage people from joining the industry or attending maritime training schools.
The USTR hearings were held over two days and included more than 50 witnesses on 14 panels. Additionally, many more offered their views in letters to the agency.
Those in favor of the proposal are unions representing steelworkers, machinists and aerospace workers, boilermakers and iron ship builders, electrical workers and the maritime trades of the AFL-CIO, the steel industry, offshore vessel operators in the Gulf, as well as 63 Democratic members of Congress.
They believe the proposal will curb China’s unfair maritime trade practices and the use of Chinese-built ships and “drive demand for domestically produced ships,” Kevin Dempsey, president of the American Iron and Steel Institute, wrote in a letter submission. “This will directly benefit the American steel industry as one of the primary suppliers of critical raw materials in the American shipbuilding supply chain.”
Nearly 300 business groups, led by the National Retail Federation, signed a letter saying that while they support efforts to “scrutinize China’s efforts to dominate the maritime industry,” the proposal “will not deter China’s broader maritime ambitions and will instead directly hurt American businesses and consumers.” They urged USTR to drop the plan because it fails “to acknowledge the realities of revitalizing a U.S. shipbuilding industry,” and develop a new strategy that embraces “sustained investments, leadership and a long-term commitment from both public and private sectors,” such as a shipbuilding bill now before Congress.
The American Association of Port Authorities, which represents over 80 public ports across the country, said if the proposal isn’t modified, it would “raise prices for consumers and businesses, lead to chaos across the nation’s port and transportation industries and would not reduce the international shipping industry’s reliance on Chinese shipyards.”
More damaging for ports, according to Cary Davis, AAPA’s CEO, the fees could encourage ocean carriers to divert their traffic to larger ports, cutting out small and medium-sized ports from their routes. “This would cause significant congestion at large ports and the collapse of business lines at small and medium-sized ports,” he said. “The results would be higher inflation, more unemployment and higher trade deficits.”
He added that the fees will also undermine years of investments made by the federal government to allow small and medium ports along the East Coast to dredge their harbors and install new cargo-handling equipment to receive the larger ships that are now transiting the Panama Canal.
Davis and other witnesses cited a study by Trade Partnership Worldwide, an economic analysis firm, which concluded that if USTR’s remedies are fully implemented, there would be a “net negative impact on the U.S. economy,” with overall exports declining 12%. Agriculture and farmers would take a big hit, while exports of petroleum and coal would drop by 8%, hurting U.S. energy markets and the maritime transportation networks involved in their transport.
U.S. vessels play an important role in moving an array of key products along inland waterways, the Great Lakes and the coasts.
The impact is already being felt as agriculture exporters say they are having difficulty booking ships beyond May because of the unknowns of the USTR plan and the coal industry has also reported trouble booking ships to get their coal shipments out for export.
Additionally, if it becomes more expensive to do business at American ports, Davis said, cargo would be diverted to Mexican and Canadian ports, where it would be transported by truck and rail to different regions of the United States.
Barge companies operating along the inland river system will most certainly feel the pinch if demand for export coal and grains like soybeans decline as traffic is diverted away from the waterways and U.S. ports. The American Soybean Association said the fees will increase costs for U.S. farmers and make their beans more expensive and less competitive globally, while competitors in Brazil and Argentina will not be subject to the same regulations.
Instead, the government should focus on “growing U.S. shipbuilding investment and capacity with positive incentives to launch a new fleet of American cargo ships,” Davis said, adding that “assessing new fees on maritime transportation and reducing ports’ business lines will not bring back American manufacturing and jobs.”
American public opinion is also weighing in. A new poll by the Alliance for American Manufacturing, which supports the fee proposal, shows the vast majority of Americans support federal action to counter Chinese dominance of global shipbuilding, with 72% agreeing that the U.S. shouldn’t depend on foreign shipbuilders, and 68% agreeing that the nation’s ability to build both commercial and military ships is a matter of national security.
The USTR will now review comments and make a final decision. It’s possible many of the provisions will be modified given the predicted disruptions to global trade.
New fees on Chinese-built ships and cranes entering U.S. ports are expected to be part of a wider initiative that the Trump administration plans to undertake to overhaul and revive the maritime industry. Called “Make Shipbuilding Great Again,” it will be announced in an upcoming executive order.
