A proposed fee structure from the U.S. Trade Representative (USTR) targeting Chinese-built ships could cost the container shipping industry over $106.9 billion annually, sparking fears of widespread disruptions to global trade, warns maritime expert John McCown.
Read also: Charting a Course Through the Tariff Blitz, Shifting Trade Policies, and Supply Chain Disruptions
The USTR’s February proposal, part of a Section 301 investigation into China’s maritime dominance, determined that China’s practices were “unreasonable” and harmful to U.S. commerce, justifying intervention. The plan includes port entrance fees of up to $1.5 million per call for Chinese-built vessels and $1 million for operators with such ships in their fleets or on order. Experts argue these steep costs would impact nearly all major ocean carriers operating in the U.S., ultimately driving up prices for American consumers.
A Tariff by Another Name?
McCown, a former U.S.-flag container shipping CEO and Harvard Business School graduate, warns that the proposed fees would function as a de facto tariff with severe unintended consequences. His analysis, submitted to the USTR, outlines the financial burden, using Chinese operator COSCO as an example.
A typical COSCO vessel making three West Coast port calls would face fees totaling $10.5 million per voyage—or $105 million annually per vessel. “Clearly, that fee would make that COSCO ship non-competitive, and trade involving such a ship would be constrained,” McCown cautions.
However, the impact wouldn’t be limited to Chinese carriers. French shipping giant CMA CGM, despite its U.S. operations and historical ties as an ally, could also face steep fees—$2.75 million per port call—due to its fleet’s connections with Chinese shipbuilding.
A Targeted Alternative
Instead of the broad, high-cost proposal, McCown suggests a more measured approach:
- A $60 fee per inbound container for non-Chinese-built ships
- A $120 fee per container for vessels constructed in China
This approach, he argues, would still generate around $1 billion annually, aligning with the existing Harbor Maintenance Fee while avoiding excessive supply chain disruptions.
Ripple Effects on U.S. Exports
The proposed fees could also undermine U.S. exports, McCown warns. He predicts that higher shipping costs would push global buyers toward alternative suppliers:
- Iowa farmers’ grain could lose market share to Brazil
- Texas LNG exports could be replaced by Qatar
- West Virginia coal could face competition from Australia
Adding to the challenge, McCown highlights that China currently produces nearly all dry (96%) and refrigerated (100%) shipping containers, meaning global logistics would feel the impact well beyond just ship operators.
The Bigger Picture
McCown likens the proposal to using a sledgehammer on trade, arguing that proving unfair practices doesn’t justify extreme measures that harm the U.S. economy. “Highway deaths are not a reason to make cars illegal,” he writes, emphasizing the need for a balanced approach.
The USTR will hold public hearings on March 24 and 26, where stakeholders will weigh in on the potential ramifications of the proposal.
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