USTR’s Proposed China Port Fees Could Cost Container Shipping Over $100 Billion, Expert Warns

A proposed U.S. Trade Representative (USTR) fee structure targeting Chinese-built ships and operators could cost the container shipping sector alone over $106.9 billion annually and severely disrupt global supply chains, according to maritime expert John McCown.

The USTR proposed new port entrance fees in February as part of a Section 301 investigation into China’s maritime dominance, which concluded that China’s actions were “unreasonable” and burdensome to U.S. commerce, warranting action.

The propose action includes fees of up to $1.5 million per port entrance for Chinese-built vessels and $1 million for operators with Chinese-built ships in their fleets or on order. Experts have warned that the proposed fee structure would impact every major ocean carrier with ships calling in the U.S., ultimately increasing costs for U.S. consumers.

In a detailed analysis submitted to the USTR, McCown, a Harvard Business School graduate and former US-flag container shipping CEO, warns that the proposed per-port-call fees would effectively act as a new form of tariff with “a bluntness and an array of adverse consequences that makes them worse” than traditional tariffs.

To illustrate the impact, McCown provides an example using Chinese operator COSCO’s transpacific service. According to McCown, the typical COSCO vessel making three West Coast port calls would face fees of $3.5 million per port call, totaling $10.5 million per voyage. Over a year with ten 35-day voyages, this amounts to $105 million in fees for just one vessel.

“Clearly that fee would make that COSCO ship non-competitive and trade involving such a ship would be constrained,” McCown notes.

The impact extends beyond Chinese carriers, however. French shipping giant CMA CGM, despite being based in “America’s oldest ally” France and operating U.S.-flag vessels through its APL subsidiary, could face fees of $2.75 million per port call due to its connections with Chinese shipbuilding and operations.

Instead of the current proposal, McCown suggests a more targeted approach: a $60 fee per inbound container for vessels not built in China, and $120 for those built in Chinese shipyards. McCown argues this alternative would generate approximately $1 billion annually – comparable to the existing Harbor Maintenance Fee.

The current proposal has also raised significant concerns about U.S. exports. McCown warns that “Iowa farmers’ grain exports would be displaced by Brazil, Texas roughnecks’ LNG exports would be displaced by Qatar, and West Virginia miners’ coal exports would be displaced by Australia.”

Adding to the complexity, McCown points out that China currently manufactures 96% of dry containers and 100% of refrigerated containers used in global shipping.

“The only certainty will be major disruption,” McCown writes, noting that past supply chain disruptions have demonstrated how “knock-on effects… will significantly amplify the direct adverse impacts.”

“Proof of unfair trade practices is no more a reason to take a sledgehammer to trade itself than highway deaths being justification to make cars illegal… It is imperative that the USTR take no action that will harm the American economy,” McCown concludes.

The USTR plans to hold a public hearing on the proposed actions this coming Monday and Wednesday, March 24 and 26.

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