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Hearing on proposed USTR port fee scheduled for Monday

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Proposed fee on Chinese vessels will hurt US operators,

ports

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Taxpayer investments in seaborne-trade at risk of being

wasted

By Lisa Baertlein

LOS ANGELES, March 24 (Reuters) - President Donald

Trump's plan to revitalize the U.S. shipbuilding industry is

likely to backfire because it relies on proposed fees on

China-linked vessels that will hurt domestic ship operators and

ports, industry executives will tell the U.S. Trade

Representative at hearings this week.

In particular, they will say the plan would hurt U.S. ship

operators by strictly limiting the vessels they would need to

use to avoid the fees, and by concentrating ship traffic at

America's biggest ports while leaving the smaller ones

neglected.

"Any proposal to support U.S. shipbuilding should also

support existing U.S.-owned carriers (not harm them)," Edward

Gonzalez, CEO of Florida-based Seaboard Marine wrote in comments

ahead of his expected testimony on Monday.

At issue is a proposed charge of up to $1.5 million for

Chinese-built or Chinese-flagged vessels docking at U.S. ports.

The Trump administration says that and other contemplated fees

would curb China's growing commercial and military dominance on

the high seas and promote domestically-built vessels.

In the short-term at least, the plan is a huge problem for

U.S. operators like Seaboard, the largest U.S.-owned

international cargo carrier, which has 16 China-built ships in

its fleet of 24 vessels, according to maritime data provider

Alphaliner. Like many U.S. operators, it relies on ships made in

China.

According to the USTR, China's share of the shipbuilding

market grew from less than 5% in 1999 to more than 50% in 2023.

USTR did not immediately respond to requests for comment.

U.S. vessel operators underpin key American industries like

manufacturing, mining and agriculture by transporting goods to

and from inland waterways, across the Great Lakes and up and

down the country's coasts.

"Since there aren't really U.S. ships being built, all of us

U.S. operators are depending on the foreign-built market and

that foreign-built market is more than 50% Chinese," Fernando

Maruri, founder of Texas-based King Ocean Gulf Alliance, told

Reuters. Its businesses rely on chartered ships to move mining,

oil drilling and agriculture-related goods between the U.S.,

Mexico, the Caribbean and Central and South America.

To completely avoid the fees, vessel operators must be based

outside of China, have fleets with fewer than 25% of ships built

in China, and have no Chinese shipyard orders or deliveries

scheduled within the next two years, according to the USTR

proposal. A draft executive order seen by Reuters earlier this

month would narrow that further by levying port fees on all

fleets with China-built vessels.

U.S.-built vessels providing international transportation

may be eligible for refunds of up to $1 million per port visit,

according to the USTR proposal.

But vessel owners and legal experts told Reuters key details

in the USTR plan are murky.

"These fees are little more than a different form of tariff

but with a bluntness and an array of adverse consequences that

makes them worse," said ocean shipping expert John McCown,

former CEO and co-founder of a U.S.-flagged container operator.

TAXPAYER INVESTMENTS POTENTIALLY SQUANDERED

To avoid the fees, ship operators could shift U.S.-bound

cargo to ports in Canada and Mexico, and rely on land-based

transport to finish the journey, according to vessel and port

operators. They also could use bigger ships and limit calls to

large U.S. ports - a feast-or-famine strategy that would starve

small ports, swamp the largest and cause supply chain stresses

similar to those early in the COVID pandemic.

If that happens, billions of dollars of taxpayer investments

in improvements and maintenance of port facilities, roads and

railways that support adjacent businesses and jobs could be

wasted, executives will tell the hearing.

The most vulnerable ports, for example, include Seaport

Manatee in the Trump stronghold of Florida.

It relies on U.S.-based World Direct Shipping for 95% of its

container cargo trade and has received both state and federal

funding for port improvements that support the business, Daniel

Blazer, whose family owns WDS, said in comments ahead of his

scheduled testimony.

Two of the three vessels WDS uses to ferry fresh fruit

between that port and Mexico are made in China, putting it in

the crosshairs for USTR fees, Blazer said. "Without WDS, all of

these taxpayer-funded investments would be squandered."