US follows through on port fees plan, with amendments

• US plan aims to charge Chinese ships up to US$1.5M per port visit
• US proposal could lead to US$50Bn annual fees, changing the map of global shipping
• Shipping groups urge caution over proposed US port fees
• Chinese-built bulk carriers struggle to secure period charters amid US port fee uncertainty
• Trump looks to restore ‘America’s maritime dominance’
• Revitalising US shipbuilding: Congress needs to step up

Exemptions and limitations to USTR action

In addition to the scheduled hearing on the new USTR fees plan, the rules of the plan include a number of limitations and exemptions.

The list of vessels that are completely exempt from fees include vessels arriving to the US empty or in ballast, some smaller vessels, some specialised vessels, some US-owned vessels, and vessels visitng ports in the continental US on a voyage of less than 2,000 nautical miles. But these exceptions do not apply to the fees on Chinese owners and operators.

The USTR Notice includes a fees exception for US-owned, Chinese-built vessels - when the US entity owning the vessel is controlled by US persons and is at least 75% beneficially owned by US persons. There is no definition of what a US person is or what constitutes beneficial ownership, however. 

Under Annex IV, requirements for exports to be carried on US-built vessels apply only to LNG carriers. And LNG carriers are exempt from port fees listed in other annexes. 

Annex IV’s rules for carrying a percentage of LNG on US-built vessels can be avoided for a further three years "if the vessel owner orders and takes delivery of a US-built vessel of equivalent or greater LNG capacity, measured in cubic feet".

Similarly, fees on foreign-built vehicle carriers (Annex III) and Chinese-built vessels (Annex II) can be avoided for up to three years if the vessel owner orders and takes delivery of a US-built vessel of equal or larger capacity. Only Chinese-owned or operated vessels (Annex I) do not have the option to order a US-built vessel to avoid fees.

In terms of restrictions on the application of fees, for Chinese-owned or operated vessels and Chinese-built vessels, fees are imposed up to five times per vessel per year. Under a related restriction, fees on Chinese-owned or operated vessels and Chinese-built vessels are assessed only once per sailing for vessels delivering cargoes at multiple US ports. 

Foreign-built vehicle carriers do not enjoy the same restrictions or limitations on fees, however, and Annex III’s rules on foreign-built vehicle carriers apply to any non-US-built vessel, not just Chinese-built vessels.

Impact of USTR action, based on current trading patterns

Shipbroker Xclusiv looked at US port data records of vessel calls and determined that the new USTR proposal would impact only a small fraction of vessels: less than 10% of dry bulk vessels calling on US ports and around 5% of tanker calls.

The brokerage’s analysis looked at the USTR action as a strategic trade policy shift as opposed to a market correction exercise, as advertised. Xclusiv called the language in the document vague making the scope and implementation of the policy changes difficult to project, but said the process of compliance could lead vessel owners and operators to find new ways of doing business.

"If these proposals are implemented, they could gradually influence the structure of global shipping trade. Chinese-owned vessels may face increased costs on US routes, potentially creating a competitive edge for non-Chinese ships. This could lead to the emergence of varied ownership arrangements, such as joint ventures or intermediary structures, as companies explore compliance strategies," Xclusiv said.

Changes from the originally proposed port fees plan

In addition to the changes highlighted in the article above, maritime law firm Watson,Farley and Williams (WFW) has compiled a list of changes in their summary on the new USTR fee structure.

• The exception from the fees on small Chinese-built vessels applies to vessels with a capacity of equal to or less than: 4,000 twenty-foot equivalent units (TEU) (relevant for container ships), 55,000 deadweight tonnes (dwt), or an individual bulk capacity of 80,000 dwt. The reference to “individual bulk capacity” appears to mean that dry bulk carriers with capacity of up to 80,000 dwt are exempt, whereas for other vessels the maximum tonnage capacity appears to be 55,000 dwt.
• There are no fees based on the fleet makeup of the owner or operator; the focus is on the vessel itself and its owner/operator.
• The fees on newbuilding orders from Chinese shipyards have been eliminated.

WFW also points out the wording of the USTR port fees rules leave out explicit definitions of some elements, including vessel ownership and operatorship, relying on US Customs and Border Protection Form 1300, which does not include a definition of a vessel’s owner and defines the operator "as the party listed on the Certificate of Financial Responsibility (Water Pollution) unless other verifiable charter or lease arrangement indicates otherwise".

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