US fees on China-based ships to cause unintended consequences – Analyst
LONDON : The US Trade Representative’s (USTR) proposal to charge up to $1.5 million to Chinese-owned ships entering US ports could cause severe congestion and delays to supply chains, according to shipping analysts.
Peter Sand, chief analyst at ocean and freight rate analytics firm Xeneta, said ocean container carriers will take action to avoid the fees, such as calling at fewer ports, which could cause major congestion and delays in the US.
“We saw a similar situation last year when carriers cut port calls in Asia and handled more containers per call at Singapore in an effort to offset the impact of the Red Sea crisis and diversions around Africa,” Sand said. “The intentions were good, but the severe congestion caused by handling more containers in Singapore rippled across global supply chains and saw average spot rates from Asia to US East Coast spike more than 300%.”
Judah Levine, head of research at online freight shipping marketplace and platform provider Freightos, said Port call fees of $500,000 to $1.5 million would translate to about $100-$300/FEU (40-foot equivalent unit) for a 10,000 TEU (20-foot equivalent unit) vessel, with carriers likely to pass those additional costs on to shippers.
“But as the proposed action would apply these fees for each US port call and most long-haul vessels make three US stops, the fee totals and the additional cost per container would be even higher,” Levine said.
Levine and Sand both noted that shippers could also take action to avoid the fees by importing goods into the US via Mexico and Canada.
Full year imports from China to Mexico in 2024 were up 15% compared to 2023 at 1.42 million TEU and imports from China into Canada are up 16% at 1.8 million TEU.
US President Donald Trump recently urged Mexico to increase tariffs on Chinese imports.
“Shippers have been using Mexico and Canada as a back door into the US to avoid tariffs on imports from China,” Sand said. “Trump has vowed to stop this trend by imposing tariffs of 25% on imports from Mexico and Canada and make using these nations as a backdoor less attractive.”
Sand said the action could also lead to more goods entering the US via air freight.
“The potential repercussions and unintended side-effects of these port fees are impossible to predict with any degree of certainty, which makes it such as challenging situation for both US importers and carriers,” Sand said.
Carrier fleet data analyzed by Xeneta shows COSCO will be hit hard due to it not only being the only Chinese carrier in the global top 10 but also having almost two-thirds of its fleet built in China and 90% of its order book coming from Chinese yards.
No other top 10 carrier has more than 50% of its fleet coming from China, giving them more options to reallocate ships between trades and adjust schedules to minimize port calls for China-built ships, Xeneta said.
On the orderbook side, the European carriers (MSC, Maersk, CMA CGM and Hapag-Lloyd) will also be hit, with all having more than half of current orderbook in Chinese yards.
“We understand from talking to Xeneta customers that they are watching and listening to every word that comes out of the US Administration, but there is so much uncertainty that they are keeping their options open and being patient before taking any rash decisions on their supply chains,” Sand said.
“Trump is weaponizing trade against China, but you have to wonder if they truly understand the consequences of this policy because there is a high risk it will cause major disruption and make container shipping more cumbersome and expensive for US importers,” Sand said.
Source: ICIS, By Adam Yanelli