The administration of U.S. President Donald Trump has announced the introduction of special fees for ships built in China, following an investigation by the U.S. Trade Representative (USTR), initiated during the Biden administration, which concluded that Chinese measures, policies, and practices unjustly burden and restrict U.S. trade.
– “Maritime and shipping industries are crucial for the economic security of the U.S. and the free flow of goods. With this decision, the Trump administration begins to curb Chinese dominance, respond to threats to the U.S. supply chain, and stimulate demand for ships manufactured in the U.S.,” stated U.S. Trade Representative Jamieson Greer.
According to the USTR, China has achieved its global dominance in shipbuilding through aggressive and targeted measures that have placed U.S. companies, workers, and the overall economy at a disadvantage.
– “Everything happening with tariffs and the Service Fee is grounded in the Trade Act, a law from 1974. In that Act, there is a Section 301 that states that the U.S. President has the right to impose tariffs or any other fees if he sees that any country is engaging in unfair market influence. Everything currently happening is a problem between the U.S. and China while the EU is just on the sidelines. Besides tariffs, there is also the Service Fee that is being sought to be introduced, which was initially initiated by the Biden administration that first began to investigate how negatively China affects the market. One of the biggest problems when this was discussed was the issue of shipbuilding that China heavily subsidizes, making Chinese shipbuilding more competitive than other global shipyards,” explains Marin Škufca, CEO of Liburnija.
Unfair Advantage
A study that culminated in January concluded that Chinese shipyards have an unfair competitive advantage. According to the initial proposal, a fee of up to one million dollars was planned for each Chinese ship owner (such as the company Cosco), while for other global shipowners whose fleets consist of ships built in China, this fee could reach up to 1.5 million dollars for each entry into a U.S. port. After a two-day hearing held in March, which involved more than 300 trade associations and other stakeholders, the decision was softened. Many warned that the U.S. is not prepared for an economic conflict that could seriously impact shipowners using Chinese ships.
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– “All of this would have a very negative impact on the freight market because, according to the initial calculation proposed, every ship that has any connection to China, and 80 percent of the global fleet does, would pay between one million and one and a half million dollars for each entry into a U.S. port. The ships we use to transport our clients’ cargo to America have 4-5 entries, so do the math,” says Škufca.
There Are Exceptions
Shipowners could be exempt from paying the fee if they provide proof of ordering a ship from a U.S. shipyard. The exemption from the fee would apply to tonnage equal to or less than that of the U.S. ship ordered. If the shipowner does not take delivery of the U.S. ship within three years of ordering, the fee will be charged immediately, according to the official report, as reported by CNBC.
Škufca notes that in the meantime, tensions have calmed and discussions are currently taking place about introducing the Service Fee but in smaller proportions, i.e., fees. He also states that there are shipowners and ships that will be exempt.
–“For example, one of the shipowners we work with has Chinese ships in his fleet, but his fleet also serves as a reserve fleet for NATO forces, as a ‘standby fleet’, and he is exempt from paying that Service Fee,” says Škufca.
Still Optimistic
He adds that in recent days they have moved from pessimism to a phase of optimism and hope that this entire situation will not affect the cargo of Liburnija’s clients, and it remains to be seen whether the Service Fee will ultimately be introduced.
– “It is being considered, but nothing has been defined yet. The thing is that this Service Fee can be introduced at any time without notice, and that creates fear because, unlike tariffs, which you can calculate in advance, you cannot know the Service Fee because it is distributed across all cargo on the ship, and you never know the volume of cargo on the ship; the shipowner knows that, and you only receive a bill at the end that can vary. Final meetings are taking place where efforts are being made to convince the Trump administration that this Fee is ultimately not good, and the latest signals coming from there suggest that the Fee could ultimately be much smaller than initially proposed. We currently have more ships contracted for the U.S., and we have been operating as if nothing will happen,” says Škufca, adding that they have also considered alternative routes, but that this story is very limited when it comes to large, heavy, and special cargoes.
