Some shipowners have taken this week proactive steps in all areas seeking to mitigate the applicability of the United States Trade Representative (USTR) 301 rules to their vessels. They even sought further clarification from the U.S. Customs and Border Protection Agency and USTR as well as from Chinese authorities on the applicability to their vessels of the provisions of the respective port fee schemes. But confusion and fears are running high among shipping companies as they are trying to mitigate any risk to their ships from the new US and Chinese port fees.
The US and China started charging new port fees on each other’s ships on Tuesday, as trade tensions between the world’s two biggest economies increase. China says its levies aim to safeguard the country’s shipping industry from discriminatory measures and apply to US-linked vessels but not to Chinese-built ships. In a last minute notice, the ministry announced on Tuesday that Chinese-built vessels are exempted from the port fees, even if they are owned or operated by US-linked companies or if they are flying the American flag.
The fees are a countermeasure against US port fees on Chinese ships, the ministry said on Oct 10. The decision follows an April 17 announcement by the Office of the United States Trade Representative (USTR), which said it would impose additional port service fees on Chinese-owned or Chinese-built vessels starting the same date.
The ministry said the US measures severely violate international trade principles, the China-US maritime transport agreement, and disrupt normal maritime commerce between the two countries.
What Shipowners say – Race to Understand Rules, Limit Fallout, and Minimise Costs
Freight rates are surging this week as the US and China trade back-and-forth hikes in port fees.
In his latest interview on Yahoo Finance, Stamatis Tsantanis, the chairman and CEO of Nasdaq-listed Seanergy Maritime Holdings Corp., a capesize and newcastlemax owner, joined Julie Hyman to discuss the developments in China’s port fees and broader trade dynamics.
Seanergy’s chief Tsantanis assesses China’s retaliation to the United States Trade Representative (USTR) through these import costs, what the situation means for the global supply chain, and how much consumers may end up paying more from this.
“We used to have the USTR and we still have the upcoming implementation of the USTR, which is the US port fees to the Chinese-related ships, and the Chinese government last Friday decided in retaliation with the USTR to impose port fees and tariffs on US-related ships. And that’s a multiple amount of money for every port of call of US-related ship to China,” said Tsantanis.
Shipowners fear that new port fees from the US and China, part of a tit-for-tat trade dispute, will lead to increased costs, trade fragmentation, and significant disruption to global shipping. Some of them are already scrambling to find workarounds, such as swapping ships from their US-China lanes or diverting them entirely, which can lead to higher shipping costs and longer routes.
The fees are a direct financial hit to shipowners, leading to increased operational costs and potentially passing costs to consumers.
The chief executive stressed that the company’s ships are not affected.
“But now for our ships, which are of course not affected by that,” as he said, “we are talking about a similar ship like ours, 4.5 to $5 million per ship per call to China. So, you can imagine that’s an amount which is exorbitant. This is the kind of situation we are facing and that came up last Friday.”
Global shipping executives have warned that the fees could spark chaos in supply chains with industry stakeholders expressing serious concerns over operational challenges.
When asked whether the companies will pass the costs to their customers, Tsantanis said: “Eventually all the costs are being passed down to the customers. It will fall down to the actual customer and that’s going to make things way more expensive, but it’s a very punitive measure from the Chinese government to actually impose this kind of tariffs and port costs to the US-related ships, and it’s a very confusing situation.”
Shipowners are rushing to assess their exposure and review ownership structures, chartering arrangements, and financing deals to avoid penalties.
“The other interesting fact is that – while we have all this groundbreaking news about tariffs, USDR, the Chinese fees – the US government is closed, so we cannot really get an answer from US government officials as to what they are going to do. And we do not have any clarity from the Chinese officials as to what ships will actually be affected. People end up paying this exorbitant amount without having any clarity as to how long this is going to continue. It only makes things way more expensive and complicated for us,” the chief executive officer noted.
Calculating 25% US ownership
Executives still don’t know how Chinese port officials would decide if a vessel was 25% US-owned and thus liable for a fee. Some listed companies made abrupt board changes to reduce the percentage of Americans and comply with the 25% US directors rule.
To remind, China’s ministry of transportation said the fees will be collected on:
(1 & 2) Vessels owned or operated by U.S. companies, organizations, or individuals.
(3) Vessels owned or operated by companies, organizations in which US stakeholders hold at least 25% or more of the equity (voting rights, board seats).
(4) Ships flying the American flag.
(5) Ships built in the United States.
However, China has now added a specific exemption that the fees will not be applicable to ships built in China, even if they fall into the first (1 to 4) categories.
Tsantanis stressed that, “At Synergy we are not affected; we have an 18% associated US ownership, which is good, and our board representation is only one US director compared to the other five.”
US Directors Fall Victim to Chinese Port Fee Rules
Recently, few US-listed shipping companies have lost one or more of their US directors as Chinese port fees bite in shipping’s boardrooms.
“We’re seeing a lot of international shipping companies with US directors that were above the threshold of 25% in respect of directors, and they have been asking them to resign to fall below the 25% threshold. That’s an abrupt move, and that’s kind of penalizing. I mean, asking people to resign just because you’re going to be paying these exorbitant fees. I don’t know, there has to be some sort of a solution pretty quick, otherwise it’s only going to get more complicated,” Stamatis Tsantanis explained.
