(Bloomberg) — Shipowners and charterers are altering leasing contracts to cope with the multi-million dollar port fees expected to be imposed on Chinese-built vessels by the Trump administration, according to people familiar with the matter.
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The contours of Washington’s plan to revitalize the US shipbuilding industry are unclear and the US Trade Representative has yet to make concrete proposals on expected measures, including levies. Still, the sector is already preparing for imminent additional risk, with new clauses that state companies hiring Chinese ships will bear the cost of any taxes in part or in full, the people said. They asked not to be identified as the discussions are not public.
Some new provisions in leasing contracts — not unlike those currently used to cover cargo-related expenses — will establish that all duties and taxes, if proposed by the USTR and introduced, will be for charterers to cover, the people added. Another version caps the amount that a shipowner pays, with the charterer covering the remaining fee.
The shipping industry has adapted swiftly to significant shocks in recent years, from upheaval in the Middle East to punitive curbs on Russia’s oil complex. Even so, the ambiguity around the US proposal has been a source of considerable frustration for the industry that remains the backbone of global trade.
Among the questions plaguing shipowners is how exactly a Chinese vessel will be defined in the final instance.
The USTR is currently recommending different fees, starting with a levy of as much as $1 million per ship per port visit. That could ultimately add up to $3.5 million per port call, if they are Chinese-built with a Chinese operator which in turn also has a ship on order from a Chinese manufacturer, according to Clarksons.
More than a third of the tonnage from ships currently trading were built by China, Clarksons data show.
A USTR hearing in Washington this week, ahead of final proposals due in April, brought together US lawmakers, labor unions, steel manufacturers and shippers, with many at odds over the hefty levies. While there has been broad concern over China’s dominance, several voices fretted that the blanket tax could snarl global supply chains and severely damage sectors of the economy.
