USTR Tariff Could Scuttle ACL’s U.S. Operations, CEO Warns

By Gavin van Marle (The Loadstar) –

Niche transatlantic carrier Atlantic Container Line (ACL) has warned it would have to exit the trade if the US Trade Representative (USTR) enforces its proposed 301 rule on Chinese-built ships.

The company, owned by Italy’s Grimaldi Group but has its operational HQ in New Jersey and is led by a US citizen, president and CEO Andrew Abbott, operates a single transatlantic string between North Europe and North America, independent of the main shipping alliances.

The ACL A service deploys five 3,800 teu con-ro vessels, able to carry containers and ro-ro cargo and all built in China between 2015 and 2016, on a port rotation of New York-Baltimore-Norfolk-New York-Halifax-Liverpool-Antwerp-Hamburg.

In Europe it also serves Gothenburg, Belfast and Dublin through agreements with third-party feeder operators.

In his submission to the USTR, which is currently accepting comments on the 301 plan, Mr Abbott wrote that the carrier’s existence as an independent operator on the transatlantic trade would likely come to an end if the proposed port fees of up to $1m per vessel call were brought in.

“ACL would be forced to terminate its US service, close its American offices, lay off its American staff, and redeploy its ships to non-US trades,” he wrote, “because the proposed action would render us totally uncompetitive versus the other carriers in the US trades.”

Mr Abbott explained that 13 years ago, when the company was selecting a shipyard to build its latest-generation vessels, Japanese yards refused to even bid for the five-ship order, Korean yards said they could no get economies of scale from it due to the unique design of the vessels, and US shipyards had no slots available for a minimum of seven years, as the US Navy had booked the capacity.”

But, he added: “Chinese shipyards were not in the dominant position that they are today. They told us they were prepared to build our complex vessel design right away at a very competitive price.

“While we had our concerns over quality, we had no viable alternatives. The American Bureau of Shipping and RINA of Italy both supervised the construction of the vessels in Shanghai.”

He said that if the 301 fees were implemented as proposed, the $500 per 40ft freight rate from North America to North Europe would rise by 500% overnight, and the $2,500 per 40ft freight rate on Europe to North America would rise by at least 80%.

“While a US-run company like ACL would have these enormous new costs and need drastically higher freight rates to cover them, our Chinese competitors would avoid a big part of the fees, because they would ride on the non-Chinese-built vessels of their alliance partners to/from the US.

“A company like ACL would be forced to leave the US trade because of this proposed action, while our competitors (including Chinese carriers) would capture our container cargo and American oversized cargo manufacturers would lose their main carrier,” he wrote.

As an independent carrier, he explained, ACL’s relationship with its customers was markedly different from the fully cellular shipping lines.

“Because of our smaller size, we differentiate ourselves with high-quality customer service to American manufacturers. As a result, ACL has developed a very loyal customer base in the US with companies we have worked with for over 50 years.

“Today ACL carries more than half of the American construction equipment, agricultural equipment, and oversized machinery moving from our ports of New York, Baltimore and Norfolk to Europe,” he noted, and urged the USTR to remove the retrospective aspect on the action.

“In the case of ACL, the proposed action will put us out of business because of a commercial decision taken 13 years ago, at a time when US shipyards were flush with US Navy orders and could not build our vessels, and when the Chinese shipbuilding industry was a minor player in the world.”

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