A series of hearings by the United States Trade Representative on proposals to impose fees on Chinese-built ships to support U.S. shipbuilding is drawing strong responses from farm groups and exporters, which say such fees will drastically hurt U.S. exports—especially farm exports.
U.S. farm exports are one segment of U.S. trade that shows a positive balance. Foreign shipping lines that serve U.S. ports are also registering strong objections and hinting at legal responses.
The roots of these hearings go back to the Biden administration. On March 12, 2024, a group of maritime unions filed a petition to the USTR under Section 301 of the 1974 U.S. Trade Act regarding China’s efforts to dominate the maritime logistics and shipbuilding sectors.
The petitioners included the United Steel, Paper, and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union; the International Brotherhood of Electrical Workers; the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers, and Helpers; the International Association of Machinists and Aerospace Workers; and the Maritime Trades Department of the AFL-CIO.
A set of preliminary hearings last May drew little public notice and mostly negative comments on proposed remedies. The Biden administration could have terminated the investigation, but allowed it to proceed in a hotly contested election year in which union support was crucial.
After finding “China’s targeting of the maritime, logistics, and shipbuilding sectors for dominance is unreasonable and burdens or restricts U.S. commerce and thus is actionable,” U.S. Trade Representative Katherine Tai left office on Jan. 16, leaving final remedies up to the incoming Trump administration.
On Feb. 21, the USTR office released its proposed actions and announced a public comment period and hearing March 24 to 26 at its office in Washington, D.C.
Proposed penalties include fines of up to $1.5 million for each Chinese-made ship that enters a U.S. port, up to $1 million per port call for Chinese operators, and up to $1 million fines for vessel operators with orders from Chinese shipyards. The USTR’s plan would also set minimum amounts that carriers must export on U.S.-built, U.S.-flagged vessels.
There’s a slight problem: those vessels mostly don’t yet exist. Out of the approximately 21,000 vessels in the world’s bulk shipping fleet, nearly 50% were built in China and only five ships, or 0.2%, were built in America.
Ag ties to container vessels
Container vessels, which were used to export about $9 billion worth of bagged grain and oilseeds in 2024, are also important to agricultural shippers and would also be severely affected by the proposal, according to Mike Seyfert, CEO of the National Grain and Feed Association, who testified before the USTR.
The American Soybean Association estimated the costs of a $1 million fee on soybean exports. Both vessels in the below examples are loaded with 70,000 metric tons of U.S. soybeans.
- Pacific Northwest to China: Total transportation cost would increase from $11.90 per bushel to $12.29 per bushel.
- Mississippi Gulf to Japan: Total transportation cost would increase from $12.22 per bushel to $12.61 per bushel.
Farmers speak out
In March 24 comments, the NGFA opposed the fees and encouraged the USTR to seek alternative methods to boost domestic shipbuilding.
“Though well-intentioned, this proposal threatens to impose significant costs on U.S. grain and oilseed exporters and erode America’s competitiveness in the international market,” Seyfert said. The comments were filed jointly with the North American Export Grain Association and the National Oilseed Processors Association.
“If enacted, this proposal would effectively eliminate half of the global bulk fleet that we need to export almost one-third of grains and oilseeds that are produced in America,” Seyfert said. “That puts U.S. agriculture at a considerable competitive disadvantage in global markets. We are already seeing disruptions in the marketplace since the proposal was put forward, including lost sales and difficulty contracting ships.”
NGFA is asking the administration to consider other ways to promote the U.S. maritime industry, such as shipbuilding grants, tax credits, and reduced regulations. However, if the USTR moves forward with proposed penalties, NGFA wants agricultural commodities exempted.
“Without an exemption we could see a significant drop in corn, soybean and wheat exports,” Seyfert said. “That jeopardizes the $65 billion trade surplus America enjoys on U.S. grains and oilseeds and hurts all of U.S. agriculture, from the exporters to the farmers.”
Mike Koehne, a soybean farmer from Greensburg, Indiana, said, “Imposing port fees on most of the maritime fleet that exports from and imports to the U.S. will increase costs for U.S. farmers—both in terms of inputs like fertilizer, seed, etc., and getting crops to market. At the same time, our competitors in Brazil and Argentina will not be subject to the same regulations. While well-intended, this proposal would ensure U.S. soybeans will bear higher costs and be less competitive in the global marketplace.”
Koehn is a member of the board of the American Soybean Association, the U.S. Soybean Export Council and the Indiana Soybean Alliance, and chairs the Soy Transportation Coalition.
The groups estimate that an additional $1 million fee on vessels carrying agricultural exports would increase costs of most shipments between $15 and $40 per metric ton, which equates to about $0.50 to $1.25 per bushel.
Devin Mogler, president and CEO of the National Oilseed Processors Association, said, “At a time when global markets are increasingly competitive, it is crucial that U.S. policies increase–not restrict–the trade of U.S. agricultural commodities. While we support efforts to promote U.S. shipbuilding, the proposed penalties would place a disproportionate burden on American farmers, processors and exporters, limiting access to essential shipping capacity and driving up costs ultimately to be shouldered by hard-working American farmers.
“NOPA urges the administration to explore alternative solutions, such as targeted incentives for domestic shipbuilding, rather than imposing penalties that could disrupt supply chains and harm the entire agricultural sector.”
U.S. exports of grains, oilseeds, and their co- and by-products support more than 450,000 American jobs and add $174 billion to the U.S. economy every year, said Alejandra Castillo, president and CEO of the North American Export Grain Association. “These markets are both highly competitive, low margin and price sensitive. We are concerned that implementation of the proposed actions would present irreversible harm to our bulk agricultural exports and erode the strong trade surplus we now enjoy.”
Foreign shippers weigh in
Foreign-owned shippers and maritime organizations are also giving testimony at the hearings.
Joe Kramek, CEO of the World Shipping Council, which represents ocean carriers, has suggested that the proposed port call fees might not be legal, hinting at possible lawsuits appealing to the same Section 301 under which the USTR investigation was launched. He also said that U.S. shipyards are already backlogged with orders from the Navy and a labor shortage constrains their ability to ramp up production.
Although comments have focused on the consequences to exports, other proposed measures penalize use of the Chinese logistics platform LOGINK, a target of bipartisan criticism for years by the logistics and shipping sectors.
A September 2022 report from the U.S.-China Economic Security Review commission concluded, “[Chinese] State control of the LOGINK platform potentially provides the Chinese Communist Party access to data collected and stored on the platform and could enable the Chinese government to gain insights into shipping information, cargo valuations via customs clearance forms, and destination and routing information.”
David Murray can be reached at journal@hpj.com.
