by Lloyd's List

THE US Trade Representative has issued its final guidance before US port fees go into effect, answering only some of the questions raised by the shipping industry.

The big takeaway from the USTR notification on Friday night: US port fees on Chinese ships will indeed begin as scheduled on October 14.

Even after Customs and Border Protection announced the payment method on October 3, there was still hope for a temporary reprieve, driven by US-China trade negotiations. China’s Ministry of Commerce confirmed on Saturday that US port fees have been a topic of discussion in trade talks with the US since June.

The go-ahead for US port fees will have significant indirect market effects, because the US decision has triggered reciprocal Chinese port fees on ships with 25% or more US ownership, which also begin on Tuesday.

Clarifications and changes to fee rules

The USTR did not address the shipping industry’s lease-financing question. The industry asked whether vessels that are technically Chinese-owned under a purely financial sale-leaseback arrangement face fees. The lack of a specific exclusion from USTR implies that they do.

The USTR did address the industry question on exemptions for voyages within 2,000 nautical miles of a US port. This raised the possibility that containerships could be exempt if they made a pre-US call in Canada, Mexico or the Caribbean.

They are not. The USTR clarified that the “the voyage or rotation is assessed based on the farthest foreign port of call”.

This is a recipe for heightened container transhipment. Boxes can be unloaded at Caribbean Basin transhipment hubs in the Bahamas, Jamaica, the Dominican Republic, Colombia and Panama, then transferred to a feeder vessel that will have a farthest foreign port of call within the 2,000-nautical-mile exemption radius.

The shipping industry also asked the USTR about the exemption for ships in ballast, noting that some arriving vessels have a small amount of cargo onboard that will not be unloaded in the US.

These vessels would not be exempt. A ship in ballast is one that “does not have any cargo or passengers onboard”, said the USTR.

Size exemptions for Chinese-built ships were also clarified. Exemptions cover fully cellular vessels (under International Classification of Ships by Type code 310) of 4,000 teu or less; bulk cargo vessels (ICST code 229) of 80,000 dwt or less; and other bulk and cargo vessels of 55,000 dwt or less (ICST codes 210-213, 220, 222, 229, 323).

The USTR clarified that the exemption for “specialised or special purpose-built vessels for transport of chemical substances in bulk liquid forms” only applies to chemical tankers under ICST code 120.

The USTR also confirmed that it will not reconsider or significantly delay its 100% tariff on Chinese-built ship-to-shore cranes. That tariff takes effect November 9, but with a grandfathering exception. Tariffs will not be imposed on STS cranes contracted before April 17, 2025 that arrive in the US prior to April 18, 2027.

Another concession: the USTR decided not to impose duties on Chinese-built intermodal shipping containers “at this time” due to concerns over domestic fallout. However, it will impose a 100% tariff on Chinese-built intermodal chassis and parts beginning November 9.

Friday’s notice also confirmed several previously announced proposals. Fees for foreign-built vehicle carriers (ICST codes 325, 332, 333, 338) will be $46 per net tonne, not $150 per ceu. US liquefied natural gas export licences will not be revoked for violations of future LNG shipping cargo-preference rules.

The vehicle carrier fees could face a legal challenge, given that the USTR investigation is specifically about Chinese shipbuilding and maritime practices and these fees also target non-Chinese-built vessels.

The USTR defended the policy on Friday, claiming that “the service fee on vessel operators of foreign-built vehicle carriers was a logical outgrowth” of the investigation and “would be effective in obtaining the elimination of China’s acts, policies and practices”.

Four new fee changes under consideration

The USTR announced four new proposed modifications; it is now seeking comment on these.

The first proposal would exempt ethane and LPG carriers (ICST codes 130, 131) ordered in China before April 17, 2025 that are in service before December 31, 2027 and have a time charter of 20 years or more. If approved, such vessels would be considered “owned and operated by the charterer in the time-charter contract”.

In a letter to the USTR on July 7, ethane producer Energy Transfer wrote, “Our customers rely on a small number of very large ethane carriers. Many of the VLECs used by our customers are under long-term charters with a Chinese shipowner that typically run 25 years. Our customers have no contractual ability to change the formality of Chinese ownership under their existing long-charters.”

The footnote in the Energy Transfer letter referred to VLEC operator INEOS, which has vessels chartered from Pacific Gas, a subsidiary of China’s Shandong Marine Energy.

One of the questions the shipping industry posed to the USTR was whether a vessel on long-term charter from a Chinese owner would be charged as a Chinese-owned vessel. While the USTR did not address the question, the proposed carve-out solely for certain ethane and LPG vessels seems to imply that all other chartered ships would be treated as Chinese-owned.

The second new proposal announced by the USTR on Friday would replace the exemption for vessels classified as “lakers” with an exemption for vessels calling at US Great Lakes ports that load and unload cargo to and from the US, Canada and Mexico (removing the exemption for other voyages).

The third proposal would temporarily exempt US-flag car carriers of up to 10,000 dwt from fees, a provision that would expire on April 18, 2029 if not renewed. This is meant to provide a temporary reprieve for foreign-built vehicle carriers serving in the US Maritime Security Program.

Port fees for Chinese-owned ethane and LPG carriers and US-flag vehicle carriers that would be affected by the new proposals would not be charged port fees on October 14. Those fees will be delayed until December 10 while the changes are considered.

The fourth proposal would impose a 150% tariff on Chinese-built cargo-handling equipment including rubber-tyre, gantry cranes, rail-mounted gantry cranes, automatic stacking cranes, reach stackers, straddle carriers, terminal tractors, top loaders, and all parts of these equipment types.

More changes are possible

The USTR emphasised that the port fee programme may continually evolve.

It said it “will continue to monitor the appropriateness of the actions being taken in the investigation, the effects of such action, and the effectiveness of the actions”.

It could decide on further modifications “based on a range of considerations, including vessel availability, economic impacts, international impacts and economic security, among others”.

On one hand, this is a positive, because it implies that the USTR could backtrack on fees as part of an eventual trade agreement with China.

“It is hoped that the US will face up to its mistake and return to the right track,” said the China Ministry of Commerce on Saturday.

On the other hand, there are negative connotations. If US-China trade relations deteriorate, fees could change for the worse. Even now, some charterers are reportedly reluctant to take bulk commodity vessels for US service, despite the ballast exemption, fearing that the rules could change.