To revive shipbuilding in the US and curb China’s influence in marine shipping, the Trump administration drafted an executive order back in February to impose a port fee on any vessel built or operated from China that enters a US port.
The proposed fee, supported by a report from the US Trade Representative (USTR), could reach up to $1.5 million per vessel. The USTR justified this action under Section 301 of the Trade Act of 1974, which targets “unreasonable or discriminatory acts, policies, or practices that burden or restrict U.S. commerce.” The presumed purpose is to promote US economic interests by addressing what the administration deems as unfair trade practices related to shipping.
“While the USTR’s findings chronicling the decline of the US flag fleet and shipyards—necessary to national defense and economic security—need to be addressed, the proposed funding mechanism is not the proper way to go about this,” said Rich Roche, Senior Vice President of Mohawk Global. “Vessel fines per port call should be replaced by simple charge per TEU or an ad valorem fee collected with the sole intention of rebuilding the shipyards.”
As outlined by the Federal Registrar notice, the US government is seeking public input on the proposed fee and requested comments that were due by March 10. Public hearings began on March 24 to evaluate the potential consequences of these new fees.
Potential Impacts of the Port Fee
The newly proposed port fee is expected to have significant effects across multiple sectors. Below are some key impacts anticipated from its implementation:
- Increased Shipping Costs
With the imposition of a port fee, carriers may raise their prices or impose additional surcharges to account for these new constraints. This change could affect contract terms, disrupt established pricing models, and ultimately lead to higher consumer costs. - Limited Carrier Options for Exports
The proposal mandates that a percentage of US exports be transported on US-flagged or US-built vessels. This will limit carrier options, potentially reducing the capacity and flexibility available for exporting goods abroad. - Disruptions to the Supply Chain
A decrease in port calls by Chinese-built vessels could lead to significant supply chain disruptions. The reduced availability of carriers could make it harder to maintain smooth logistics operations, particularly for industries relying on high-volume shipping. - Reliance on Foreign-Flagged Vessels
US businesses currently rely on vessels registered in other countries to meet their import and export needs. The new fee could exacerbate this reliance if the US shipbuilding industry is not able to ramp up capacity in time. - Specialized Shipbuilding Gaps
The US shipbuilding industry does not yet have the specialized expertise required for certain sectors, such as dry cargo and bulk liquid shipping. This gap in capability could further hamper efforts to replace foreign-built vessels with domestic alternatives. - Diverted Cargo and Consolidated Port Calls
If shipping costs rise and fewer vessels are available to make port calls, some cargo may be diverted to Canadian or Mexican ports for transshipment to the US. Additionally, port calls could be consolidated, meaning smaller US ports may lose business as larger ports take on more of the burden.
As the US moves forward with this proposal, the outcome will depend on various factors, including how the fees are implemented and the ability of US shipyards to meet growing demand. The public hearing on March 24 will offer stakeholders an opportunity to voice their concerns and contribute to the shaping of this policy.
While the goal of reducing reliance on foreign-built vessels and boosting the US shipbuilding industry is clear, the economic consequences—particularly in terms of increased costs and supply chain disruptions—could be significant. This will be a critical issue for both the shipping industry and US trade as the situation continues to unfold.
We will continue to monitor developments related to these port fees and provide more information as it becomes available. If you have additional questions about how this may impact your business, reach out to your Mohawk Global Representative.