Shipping industry to seek USTR port fees rejig on size, ownership

Shipping industry stakeholders plan to seek a raising of ship sizes to 85,000 dwt for exemptions from the US Trade Representative's proposed fees for China-built ships, if they are owned and operated by non-Chinese companies, several market participants said May 19.

The stakeholders also want a review of rules for ships that are owned by Chinese companies but operated by entities elsewhere.

Several China-built tankers and drybulkers in the 80,001-85,000 dwt range are either owned by or on a multi-year charter to operators registered in other countries, who use them to move cargoes into and from the US, said a tanker broker.

In proposals in their current form, Chinese-built but not Chinese-owned ships qualify for an exemption from port service fees under the 80,000 deadweight tonnage capacity threshold, but many Aframaxes and Kamsarmaxes can benefit if this limit is increased by just 5,000 dwt, the broker said.

There are ships coming into the US to load grains that are more than 80,000 dwt; if the exemption limit is raised to 83,000 dwt- 85,000 dwt, all cargoes will be covered, Jay O'Neil, former senior agricultural economist at Kansas State University, told Platts, part of S&P Global Commodity Insights.

Depending on the buildup of the ships, those with higher dwt may load less volume and vice versa.

Panamaxes and Kamsarmaxes had a 31% share in US trade by volume in 2024, according to data from S&P Global Commodities at Sea. According to traders, the Panamaxes may keep enjoying the fee exemption while the Kamsarmaxes will be on the receiving end.

Almost all of the US grains trade is already exempted under the current proposals, but the dry bulk majors have a considerable number of ships that are in the size range of 82,000 dwt- 84,500 dwt, and it is therefore important to get the exemption limit raised, said O'Neil.

A hearing on the proposed fees is scheduled for May 19 in Washington, DC.

Head owners versus disponent owners

Lower fees have been proposed for China-built ships that are not owned by Chinese companies, but a section of the shipping industry wants these to apply to time-chartered ships as well.

Ships have a multi-layered ownership structure. The head owner charters out ships for multiple years to companies, which then operate them and are called the disponent owners.

Owned and operated are terms that cannot and should not be used together because Chinese-owned ships are operated and period-chartered by companies domiciled in other countries, said a broker in Seoul.

This is a grey area and clarifications will have to be sought because many ships with a Chinese head owner have the disponent owners and operators registered in another country, said a chartering executive with a global commodities trading company. "This is an issue that the USTR needs to address," said O'Neil, who has already submitted his testimony on the issue to USTR.

"It is unlikely that an American company will take Chinese-owned tankers on time charter after mid-October," said an executive involved in shipping investments. The USTR fees on China-linked ships are proposed to be levied from Oct. 14.

There are several instances where American refineries and oil importers take Chinese-built ships on time charter for several months or years. If they are more than 80,000 dwt and import cargoes to the US from more than 2,000 nautical miles, they will be subject to exorbitant fees if the USTR proposals are implemented in their current form.

Two-tier market

Market participants do not expect significant revenue generation if these proposals are implemented because of the provision for circumventions and turnarounds.

The latest proposals from the US Trade Representative will divide large, dirty tankers -- such as VLCCs and Suezmaxes -- and dry bulk ships into China and non-China origin categories if and when a dollar per net ton fee is imposed on ships calling at US ports.

The proposals would require China-built, crude-laden VLCCs to pay nearly $1.9 million when calling at US ports starting mid-October -- a figure expected to rise to over $2.4 million within a year even if they are not owned by Chinese companies, according to brokers in Tokyo and Seoul.

A quarter of the VLCCs involved in US trade in 2024 were China-built, according to UK-based shipping consultancy Maritime Strategies International.

However, a large portion of US crude imports will be exempt from short-sea shipping within 2,000 nautical miles of American ports.

The US exports over 10 million b/d of crude and refined products combined, and imports more than 8 million b/d, according to US government estimates.

There will be ownership segregation by route and the tier, Kamsarmaxes specializing in US trade, will command a premium but most trade will be done on Panamaxes if the proposals are not tweaked, said O'Neil.

Apart from grain exports and fertilizer imports, US trade of pig iron, salt and iron ore will also be impacted, he said.