Port fee questions linger after shipping used as trade-war ‘pawn’

MORE details have emerged on the suspension of port fees but uncertainty lingers. It’s not a 100% done deal yet and there are still questions on the scope of the fee suspension.

The White House issued a fact sheet on Saturday stating that US port fees will be suspended on November 10 for one year. China’s Ministry of Commerce said on Thursday that it will remove port fees as soon as the US does.

“It’s going to be a reciprocal suspension so if one doesn’t do it, the other’s not going to do it,” said Kathy Metcalf, president emeritus of the Chamber of Shipping of America, in an interview with Lloyd’s List on Monday.

Statements from the US and China still need to be converted into a final agreement, which will hinge on conclusive wording on a wide range of issues that are more impactful to the two nations than port fees. Treasury Secretary Scott Bessent said that signatures could come this week.

“I think the governments are inching towards implementation of this suspension,” Seward & Kissel partner Brian Maloney told Lloyd’s List.

According to Metcalf, “Obviously, the agreement has to be documented. How that’s going to come out and be announced, I don’t know.”

Maloney noted that the comment period on the latest proposed changes to the US Trade Representative’s Section 301 US port fee rules closes on November 10, the same day the port fee suspension is scheduled for.

“It’s an interesting correlation, the way it lines up. I get a sense that the public comment period will close and then you will get some sort of regulatory language that implements this,” he said.

Port fees were still being charged as of Monday. They are collected by US Customs & Border Protection, which does not have the authority to unilaterally pause them without the revised USTR rule.

“Customs is only here to implement the policy that’s on the books at the time,” said Maloney. “Until the regulatory language is published by the USTR or in an executive order, Customs doesn’t really have the discretion to freelance and preempt those fees earlier.”

Short-term impacts of fee pause

The announcement of a specific deadline raises the possibility of operators delaying US port arrivals to avert millions in fee costs.

The queueing list for the ports of Los Angeles and Long Beach shows four containerships of Cosco and OOCL en route and scheduled to arrive before November 10: the Xin Ya Zhou (IMO: 9334935), CSCL South China Sea (IMO: 9645920), CSCL East China Sea (IMO: 9645918) and OOCL Violet (IMO: 9949778).

Due to Chinese ownership, these vessels would be charged the higher fees of $50 per net tonne. Ship-position data from Lloyd’s List Intelligence’s Seasearcher shows all four vessels are now slow steaming in the Pacific.

Metcalf agreed that delaying arrival could make sense “if a ship had that option”.

Many in the industry had predicted that port fees would be delayed as part of the broader US-China trade talks. However, due a quirk of timing, the meeting between US President Donald Trump and China President Xi Jinping occurred two weeks after the port fee implementation date.

The prediction that port fees would be a part of the broader deal proved correct, but the implementation timing created a messy stop-and-start process.

This raises the question of whether the final US-China agreement will allow companies that paid port fees between October 14 and November 10 to get their money back.

“I’m guessing the answer is ‘no’ for both countries,” said Metcalf. “But what I’ve advised is that if you’ve paid the port fee, approach the local CBP office or local Chinese port collection folks and ask the question.”

“I’m not holding my breath on that,” said Maloney. “I don’t think that would necessarily be offered.”

Vehicle carrier fee question

The vehicle carrier sector has been particularly hard-hit by US port fees. Charges to vehicle carriers more than tripled on very short notice to $46 per net tonne.

Unlike other vessel segments, all foreign-built vehicle carriers are charged, not just Chinese-built ones.

Although the vehicle carrier orderbook is dominated by Chinese yards, most on-the-water tonnage is not Chinese-built. Just 12% of vehicle carriers calling in the US in 2024 were constructed in China, according to data from Lloyd’s List Intelligence.

Fees for Chinese ships are covered by Annex I and II of the USTR port fee rule. Foreign-built vehicle carriers are covered under Annex III. Annex IV covers liquefied natural gas carrier cargo preferences; Annex V covers cranes and cargo handling equipment.

“The way we read the White House fact sheet, everything under the 301 decision would be suspended for one year, which means all five of the annexes,” said Metcalf.

Maloney is not entirely sure that port fees for vehicle carriers under Annex III will be suspended.

“I still have that question from everything I’ve read and seen to date,” he said. “The fact sheet is carefully worded and says they will suspend implementation of the ‘responsive actions’ [taken pursuant to the Section 301 investigation].

“You could argue that you would be surprised if only some of the fees were exempt and not all of them, but I’m in wait-and-see mode. I want to see the formal language to understand the scope.”

The political challenge in keeping Annex III fees is that some Chinese-built vehicle carriers would be charged, and if any fees for Chinese ships were retained, it would violate the agreement.

The only way to avoid that would be to exempt Chinese-built vehicle carriers from fees and keep the rest, which would be completely counter to the rationale for the fees in the first place, which is to address the practices of Chinese shipbuilding.

Andy Abbott, chief executive of con-ro operator Atlantic Container Line, told Lloyd’s List, “We read the White House statement as: all of the features of the Section 301 fees are suspended for one year starting November 10. I guess we won’t know for sure until our first ship calls at Port Newark Container Terminal after that date.”

Assuming Annex III is included in the suspension, it will provide a temporary reprieve to vehicle carrier operators that are being severely impacted.

The US port fee equates to around $1m per call for larger vessels, capped at five calls per ship per year. Höegh Autoliners estimated that if fees are not suspended, it would cost the company $60m-$70m a year.

Wallenius Wilhelmsen said in a USTR submission that the car carrier industry has long-term contracts with customers that prevent the fee from being passed on under existing contracts.

A major advantage of a one-year suspension is that it would allow car carriers to delay that exposure, and renew contracts that expire in the interim with the fee burden on customers.

It could also allow more time to lobby for relief.

ACL, which transports containers and vehicles, was forced into the vehicle carrier fee category — which pays a much higher rate than Chinese-built ships of non-Chinese operators — due to the USTR’s decision to base fees on the International Classification of Ships by Type code.

The decision to use ICST codes, together with hike in vehicle carrier fees from $14 to $47 per tonne, was announced on October 10, just four days before implementation.

According to Abbott, “We still feel that our ships have been mis-designated as vehicle carriers — it’s hard to be primarily a vehicle carrier when only 1% of your cargo is cars — and we are working with the US authorities to have that rectified. But now we appear to have breathing room to get that fixed.”

Implications of on-off nature of port fees

The fact that port fees are now a bargaining chip in the broader US-China trade saga implies that port fees could theoretically come back on short notice if that relationship suddenly sours, as it already has multiple times this year.

“That’s part of the problem with this whole thing,” said Metcalf. “The way the administration is negotiating various trade issues, including tariffs, means that you don’t know what tomorrow is going to bring.

“These are expensive assets and if you engage in US trade there is a lack of predictability on whether the cost tomorrow to operate these assets in the US will be prohibitive.

“Obviously, we strongly support the decision [to delay fees] but it’s not desirable for the shipping industry to be a pawn in the trade war,” said Metcalf.

Many ship operators have redeployed tonnage as a result of port fees. The suspension of fees may last one year, or it may not, if US-China relations collapse in the interim. Will operators keep current deployments in place given that risk, or change them back?

Metcalf believes that ship operators have the flexibility to adjust fairly quickly. “If the marketplace is there for US port calls, I’m putting my Chinese-built ships back into service here,” she said.

Meanwhile, the one-year pause on fees for vehicle carriers — assuming there is one — raises issues related to US shipbuilding and potential legal challenges against the USTR.

The fee on all foreign-built vehicle carriers was set so high to incentivise operators to obtain an exemption in the only way they could: by ordering US newbuilds. The revitalisation of yard acumen for vehicle-carrier construction is particularly important to America given this segment’s role in US military sealift.

But that incentive will only work if the high port fee is permanent, and not subject to being turned off and on for political purposes.

If port fees for vehicle carriers are temporarily suspended, this may change the long-term calculus for car carriers considering US newbuilds as relief from future fees.

On the legal front, Maloney said, “My view is that the fees on the car carrier segment in particular don’t seem to line up directly with the goal of the investigation, which is to counter Chinese dominance in shipbuilding, and that’s a potential issue with that segment of the action.”

Multiple industry responses to the USTR argued that the vehicle carrier fees are clearly a US shipbuilding incentive, not a Chinese shipbuilding penalty.

A legal challenge on USTR overreach “is still a possibility”, said Maloney.

If vehicle carrier fees are paused, that could temporarily undermine a legal challenge. “They might face a potential ripeness or mootness issue if the fees were paused in such a way that [plaintiffs] were not harmed,” he said.

On the other hand, if the USTR removes the Chinese vessel fees but keeps the fees for non-Chinese-built vehicle carriers, it would make the legal case for opponents even more compelling.

“You’d need a dispute to be brought to the head and I’d think you’d need it to be of such commercial significance that a company would want to stick its neck out,” said Maloney.