by Lloyd's List
20 December 2024 (Lloyd's List) - THERE is a long and winding road between introducing legislation in Washington and final enactment, with roadblocks, revisions and horse-trading along the way. If the initial language of the SHIPS for America Act survives the journey and become law someday, the implications for shipping would be enormous.
The bill – which is sure to be highly controversial – was introduced by a bipartisan group of senators and representatives on Thursday. In other political climates, its chances of survival might be considered slim. In the “America First” era of Trump 2.0, it’s less of a long shot.
According to one of the bill’s sponsor, Arizona senator Mark Kelly, the goal of the bill is “revitalising the US merchant marine by establishing national oversight and consistent funding for US maritime policy, making US-flagged vessels commercially competitive in international commerce by cutting red tape, rebuilding the US shipyard industrial base, and expanding and strengthening mariner and shipyard worker recruitment, training and retention”.
From the perspective of international shipping, there are four proposals in the bill language of particular concern: tonnage taxes on Chinese-owned or Chinese-flagged ships; a requirement to import a portion of Chinese goods on US-built, US-crewed ships; a requirement for the US to ship a portion of its crude and liquefied natural gas exports aboard US-built ships; and a tenfold increase in liability limitations for non-US ships.
Tonnage tax on Chinese ships
The US president can suspend the imposition of special tonnage taxes and lighthouse dues under current law for “a foreign country that does not impose discriminatory or countervailing duties to the disadvantage of the US”.
The new bill would preclude suspensions of tonnage taxes and lighthouse dues for “a vessel registered under a registry of foreign country of concern”, with those countries defined as Russia, China, Iran and North Korea.
“In effect, this will impose a new duty on goods imported on Chinese-owned or Chinese-flagged vessels,” said Kelly.
Lars Jensen of Vespucci Maritime wrote in an online post, “This impacts not just the Chinese carriers but also carriers who are in an alliance or vessel-sharing agreement with Chinese carriers, such as CMA CGM and Evergreen in the Ocean Alliance.” It would also impact “ONE and HMM on the Atlantic, now operating together with Ocean Alliance. Presumably it will also impact other carriers chartering Chinese-owned vessels.”
Requirement for imports from China
The bill would require that 10% of cargo imported from China is carried on US-built, US-crewed vessels 14 years after the legislation is passed: 1% in the fifth year and an additional 1% in each year thereafter until the 14th year.
It would require a rulemaking no later than four years after passage to determine which goods are subject to the requirement.
Fines would be levied on noncompliant shippers at levels that would be “greater than the difference” between the cost of shipping aboard a US-built, US-crewed vessel and the cost of using a foreign vessel.
To put the scope of proposal in context, the US imported 887,781 teu of containerised goods from China in November according to Descartes, representing 37% of all US containerised imports. America’s current containership fleet is engaged in Jones Act trades. A fleet large enough to handle the proposal’s requirement would have to be built at US shipyards.
Requirement for use of US ships for exports
The SHIPS for America Act would eventually mandate that 15% of US LNG exports and 10% of US crude exports be shipped aboard US-built vessels, a proposal sure to raise alarms among US energy companies that profit from those exports.
On the LNG side, the proposal would require that at least 2% of US LNG exports are shipped in the first five years after the bill is enacted on “a vessel documented under the laws of the US”, then 2% of US LNG exports on US-built LNG ships in the sixth and seventh years, with that percentage on US-built LNG ships gradually ratcheting up to 15% by the 22nd year.
On the crude side, 3% of exports would be required to be carried on US-documented ships that do retrofits or buy certain equipment in the US in the first four years after the bill is enacted, then 3% on US-built crude tankers in the fifth through seventh year after enactment, gradually rising to 10% in the 14th year.
Exceptions would be made if the new LNG and crude export rules violated requirements of free trade agreements.
Tenfold increase in liability limitation for foreign ships
In a move clearly driven by the catastrophic allision of the containership Dali (IMO: 9697428) with the Francis Scott Key Bridge in Baltimore, the proposed law would also drastically revise the Limitation of Liability Act.
That circa-1851 law caps liability to the value of the vessel and pending freight.
According to Kelly, the SHIPS for America Act “would establish that the liability of a foreign vessel for any claim, debt or liability shall be 10 times the value of the vessel and pending freight, whereas the liability of a US-flag vessel shall be one times the value of the vessel and pending freight. This excludes liability for personal injury, wrongful death or a claim for wages.”
