The Daily View: Port fees are here. Let the market chaos begin

THE port fee process is going to be messy — and messy is good for shipping rates.

The shipping industry had months to plan for US port fees, but there had been lingering hope for a last-minute reprieve. As a result, some liner operators have yet to shift all of their Chinese-built tonnage out of US strings.

Now that US port fees are a done deal, more redeployments lie ahead.

Meanwhile, vehicle carrier owners knew US port fees were coming, but got walloped with a last-minute tripling of the cost.

When vehicle carrier executives in Oslo went to sleep on Friday night, they thought their ships may have to pay $14 per net tonne beginning four days later. When they woke up on Saturday morning, they found out that their bill had more than tripled, to $46 per net tonne.

For a single 35,000 tonne vehicle carrier, that’s an annual increase of $5.6m, at the cap of five US fee payments per year. Then, multiply that out by the number of foreign-flag vehicle carriers in US service — which is essentially all of them.

All segments of the shipping industry face inherent uncertainty because US fee levels may change going forward. After what just happened to vehicle carriers, there are clearly no guarantees.

There is also a big question about enforcement. Customs & Border Protection left the determination of fee amounts to the arriving ship operator. Is this an honour system or is someone going to check the numbers someday?

Chinese-built tankers and bulkers are exempt from US fees when in ballast, but with all of this uncertainty, it wouldn’t be surprising to see charterers conclude: Let’s not take the chance and avoid using Chinese-built tonnage for US calls altogether.

The situation is even more uncertain when it comes to Chinese port fees, and this is where the largest freight rates effects will emerge.

Unlike on the US side, shipping had no time to prepare. The China port fees were announced on Friday and details weren’t published until the early hours of Tuesday morning in China.

Chinese fees of $56 per net tonne will be charged to vessels that are owned or operated by any entity in which US individuals or businesses directly or indirectly hold 25% or more of the equity, voting rights or board seats.

Shipping firms and local agents must file declarations before arrival, including ownership disclosures, vessel’s country of construction, flag state, owner, operator, leasing arrangement, and intended Chinese ports of call.

Maritime authorities and port operators will handle the enforcement process. However, if Chinese authorities take this one step further and demand documentation to verify the ownership structure of each and every vessel, this could prompt port delays as the process becomes more complex.

During the pandemic, dry bulk rates shot up as a result of pandemic procedures at Chinese terminals.

The bigger picture for freight markets is that charterers abhor uncertainty, and there is even more uncertainty now over the US ownership rules for China port fees than there is over the fee rules at US ports.

Ships with any possible liability for Chinese fees will steer clear, leading to market dislocations, and higher rates. The market effects have already begun.

Greg Miller
Senior maritime reporter, Lloyd’s List

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