Loadstar Leader: China's port fee retaliation could do a lot of collateral damage

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While Donald Trump’s trade war via his so-called reciprocal tariffs is undoubtedly the cause of uncertainty roiling the waves of container shipping, the worst collateral damage may be from China’s retaliatory tactics.

Especially the addendum that a vessel would be liable to its ‘tit-for-tat’ port fees if 25% of its ownership was found to be linked to US entities.

It seems pretty obvious that this is, first and foremost, directed at the slew of tanker operators listed in New York, but there are implications for container shipping.

Whereas the USTR 301 port fees largely affect the transpacific and transatlantic trades – and are mostly nullified by the fact there’s enough South Korean and Japanese ships to replace them – the reciprocal Chinese measure could affect any trade that connects with the PRC, should Beijing determine a New York-listed non-operating shipowner breaches that level and the fee can be applied to its ships.

And, as we saw with yesterday’s story in Splash that a single 4,870 teu Matson vessel yesterday incurred fees of $1.7m for a Shanghai call – $700 per 40ft – they are not an insignificant extra cost.

Carriers are already voting with their feet, as we report today, but even as the legislation came into effect there remains a whole heap of questions.

Are there enough hours in the day for shippers’ compliance departments to vet every single vessel in a carrier’s fleet, as well as those they have chartered? The lawyers are certainly going to have a field day with this.

Will China publish a list of entities – or better still, given how opaque ownership can be in this industry, the vessels subject to the fees? The expectation, according to this excellent brief by law firm HFW, is they will mirror whatever the US does, and the US appears to have been doing its homework on Chinese ownership interests.

We fear we’ll hear horror stories, with some fees delivered as a nasty surprise.

Will carriers try to recoup these extra costs from shippers and forwarders? Cosco and OOCL were adamant they would not impose USTR-related surcharges, but will the same hold true of a carrier operating on a trade independent of the US, but whose vessel is on a time-charter from a Nasdaq-listed owner that passes the 25% threshold?

Or will the Chinese “be practical” and decide not to levy a port fee which leads to a $700 per 40ft surcharge on, say, a Bangladeshi buyer of Chinese raw textiles, or a Kenyan importer of Chinese consumer goods?

It would be an ironic example of the law of unintended consequences if, at a time when China is trying to expand its export markets beyond the US, that its own trade policy damaged those prospects.