Port Fees on Chinese Ships Would ‘Distort Competition’

Proposed fees on Chinese-built ships calling at U.S. ports could potentially “distort competition” in container shipping as we know it, according to one industry consultancy.

Container shipping research firm Alphaliner named HMM (Hyundai Merchant Marine), Yang Ming and Evergreen as the big winners of a port fee-inclusive shipping environment ahead of the second day of Congressional hearings on the proposal Wednesday.

Evergreen made 53 calls at U.S. ports in February, but none of the ships from the Taiwan-based ocean carrier were built in mainland China. HMM made 15 port calls during the month, only using South Korea-built vessels.

Taiwan’s other major carrier, Yang Ming, had just one port call with a Chinese-built ship, across the 23 stops it made in the U.S. that month.

As per the proposed fees, any vessel operator stopping at a U.S. port with a Chinese-built ship would have to pay up to $1.5 million per port call, depending on the percentage of Chinese-built vessels they have in their fleet.

Of the three carriers, only Yang Ming would have to pay the $1.5 million fee for its one stop it made at The Port of Tacoma with the 12,726-container capacity YM Truth vessels.

Two of the three carriers also have a major edge compared to their counterparts due to their current orderbook.

With the U.S. Trade Representative’s (USTR) proposal, carriers would be charged up to $1 million per port call if more than 50 percent of their newbuilding orders are with Chinese shipyards. Lesser fines would be imposed depending on the percentage of incoming ships out of China.

According to data from freight benchmarking platform Xeneta, both Yang Ming and HMM have no orders coming out of China.

For Evergreen, the story gets slightly more complicated as 17 percent of its orderbook originates in China. That would subject the company to up to $500,000 per vessel entrance to a U.S. port, under the proposed actions.

But Evergreen’s orderbook percentage remains far below the other major carriers who already making calls to U.S. ports with Chinese-built ships.

Alphaliner said the carriers with the most U.S. calls using Chinese-built vessels were Maersk (38 vessels out of a total of 214), ZIM (37 ships out of 73), CMA CGM (36 of 139), MSC (34 of 218) and China’s Cosco Shipping (25 of 72).

“It is obvious that these carriers would like to replace those ships in US liner services if the fee proposal were implemented. This would create a problem for ZIM, as the 37 calls with vessels made in China represent just over half its total calls,” said Alphaliner in its weekly newsletter. 

ZIM would get a major reprieve in the long run since it currently has no Chinese vessels in its orderbook, according to Xeneta.

To assess the potential effect of this fee structure, Alphaliner analyzed the calls of all container ships carrying more than 1,000 20-foot equivalent units (TEUs) operated by the top 10 carriers at the 20 biggest U.S. ports in February.

Alphaliner counted 1,002 port calls, 190 of which were made by Chinese-built ships (19 percent). These calls were realized by 488 different vessels.

While the proposed fee structure would be imposed due to the USTR’s finding of China’s “unreasonable” dominance as a maritime, logistics and shipbuilding nation, most of the container ships entering U.S. ports in February were built in South Korea (54.5 percent), according to Alphaliner.

China comes in second place (20.9 percent), with Japan following in third (12.3 percent).

Although the $1.5 million fee has been the most widely reported of the penalties levied after the nine-month USTR investigation, much of the controversy surrounding the punitive measures surrounds the fact that many of these levies would add up significantly and pass on costs to importers and exporters alike.

Container shipping giants that build their ships in China like Cosco Shipping and its subsidiary Orient Overseas Container Line (OOCL) would be paying up to $3.5 million per port call under the circumstances currently laid out. This would cost a pretty penny for many importers, as 17 percent of U.S. inbound container cargo from the Far East comes on Chinese carriers, according to container shipping analysis firm Linerlytica.

After Wednesday’s Congressional hearing, the USTR will review the testimonies and written submissions laid out by shipping firms, retailers, manufacturers, farmers and other importers and exporters “to determine the appropriateness and feasibility of the proposed actions.”

Despite the calamity over the fees themselves, U.S. sentiment toward the actions against China are largely supported by citizens and lawmakers across parties—especially the latter, which have introducing bipartisan legislation to revitalize American shipbuilding.

Seventy-two percent of Americans agree that the U.S. cannot remain dependent on foreign manufacturers to build ships, according to a survey from the Alliance for American Manufacturing. The 2,200-respondent survey indicated that 68 percent agree that the nation’s ability to build ships for both commercial and military needs is a matter of national security.