Section 301 ‘China Built Ship Tariff’ proposal explained

By Gary Williams, Director of Transportation & Regulatory Affairs 

Ahead of comment, I found myself digesting the U.S. Trade Representative (USTR) proposal with Competitive Shipping action team Chair Tina Lyons and outlining the impacts that would hit most SSGA members disproportionally as suppliers of a FOOD product rather than a COMMODITY.    

For those who have yet to get their arms around the proposal, I will greatly condense it into five parts: 

1. EACH PORT ENTRY in the U.S. in which a vessel built in China calls will be assessed a tariff amounting to $1,000 per ton of vessel capacity, up to $1 million at each port in the U.S. it calls. Trade routes that have more than one call on the West Coast would be assessed at each stop. In the Great Lakes, each U.S. port stop would again result in a new tariff assessment, including vessels that transport between Canada and U.S. 

1. EACH PORT ENTRY, depending on the percentage of fleet that an owner has comprised of China-built vessels, that operator will be assessed an additional $500,000 to $1.5 million in tariff per vessel call. 

1. EACH PORT ENTRY, any owner with over 50% of their orders in the next 24 months for shipbuilding comprised of China-built vessels will be assessed an additional $1,000,000, scaling down to $500,000 if that amount is less than 25% of orders. 

1. On a staggered scale and hitting the maximum in seven years following the date of action, the export of at least 15 percent of U.S. goods, per calendar year, is restricted to export on U.S.-flagged vessels by U.S. operators, of which 5 percent must be U.S.-flagged, U.S.-built vessels by U.S. operators. Further, U.S. goods may be approved for export on a non-U.S.-built vessel provided the operator providing international maritime transport services demonstrates that at least 20 percent of U.S. products, per calendar year, will be transported on U.S.-flagged, U.S.-built ships by the operator. 

1. An owner can earn credits against these tariffs of $1 million for each U.S. flagged, U.S.-built ship that the owner enters into a U.S. port. Estimates I’ve read state that this is perhaps less than 2.6% of the global fleet. The capability to build out the U.S. fleet to meet the export requirements and offset or avoid tariffs being assessed appears impaired in being able to reach the needed amount of vessels by these dates, and/or to offset tariff assessment. 

The Competitive Shipping action team comment letter to USTR urging for consideration in adjusting the current proposal outlines the devastatingly negative impacts upon our members. Many of these members have spent decades building direct market relationships that could go away completely in the face of impossibly high food cost for the destination country. 

 We hope to be involved in the conversation with those who have influence in Congress and in the administration so that our impacts can be understood and considered.