US proposal to penalize Chinese Ships may impact Indian Trade
NEW DELHI : Indian Shipping trade stands to face significant disruption if the US proceeds with its plan to impose hefty port fees on Chinese-owned ships and vessels constructed in Chinese shipyards. The United States Trade Representative (USTR) has announced a proposal to charge these vessels $1 million or more per port call in US ports. Notably, over half of all ships delivered globally in 2024 were built in China.
This bold proposal is a result of an ongoing USTR investigation into China’s shipbuilding and maritime practices, launched in March 2024 under the influence of US labor unions, according to maritime data and analytics firm Lloyds List Intelligence. The proposal comes amid the global shipping industry’s struggle to recover from the ongoing aftermath of the Suez Canal crisis.
If enacted, the new policy could directly affect Indian shipments, as India relies heavily on foreign-owned vessels for international cargo transport, especially to the US. Flexport, a US-based logistics company, reports that about 30% of the top 20 ocean carrier fleets are made up of Chinese vessels. As container ships typically make 2-3 port calls per journey, the proposed fees could increase costs by over $3 million per trip, a substantial amount when compared to typical revenues of $10-15 million per voyage.
Should the proposal move forward, Flexport predicts that ocean carriers may reroute some shipments through ports in Canada or Mexico, and then transport them by rail or truck into the US. However, the capacity at these alternative ports is limited, and they wouldn’t be able to handle the volume currently processed by US ports. It is also expected that shipping companies will adjust their fleets by turning to Korean and Japanese vessels on US trade routes, with some carriers possibly choosing to unload Chinese-built ships to avoid the penalties.
China’s strategy of dominating key sectors, including shipbuilding, has severely impacted global competition, with its market share in the shipbuilding industry rising from less than 5% in 1999 to over 50% by 2023. Additionally, China now owns more than 19% of the global commercial fleet and controls production of 95% of shipping containers and 86% of the world’s intermodal chassis. In response, the USTR has proposed these measures as leverage to force China to reduce its control over these crucial industries.