By Gary Williams, Director of Transportation & Regulatory Affairs

You can’t even call it the elephant in the room – the tariff elephant is smoking a pipe, with comfy loafers on and reclined in the living room by the fire in my house.

I’m sure you, like myself, go through your daily work, tackling what needs to be done and ensuring that what is charged of you to continue gainful employment and ensuring viable business happens. If you are also like me, every fourth or fifth thought goes to, “but what if…”

Here’s what we do know about the Section 301 proposal on China-built ship tariffs:

The U.S. Trade Representative (USTR) closed their comment period March 25, as reported in last issue, and SSGA participated in providing written comment. A copy of that comment letter is linked here.

SSGA further provided a signature as a supporting party along with more than 320 parties on a coalition of shipping and importing organizations on a letter drafted by the National Retailers Federation and an even larger number of signatures (perhaps double) of agricultural organizations and companies on a letter drafted by the National Grain and Feed Association.

Several organizations were called upon to give comments to the USTR in the week that followed, and a letter was drafted to the USTR by 18 members of Congress to express concern on impacts.

It’s expected by mid-April we will get our next look at what USTR has modified (or not) in the Section 301 proposal on China Built Ship Tariffs.

There is absolutely no doubt that any tariffs that are implemented will be passed through to be paid by the shipper (unless exemptions are issued). Some container lines have already issued their policy that ANY costs associated with tariffs will be for the account of the shipper. If you have containers headed to the port, and an effective date of May 1 is reached, for example, that box will be assessed the fee that the steamship line (SSL) deems as representative of their likely cost due to the tariff being imposed. It’s cloudy whether these fees would be due immediate/upon freight bill becoming due for payment, or at a quarterly or annual billing date. It’s also unclear whether that fee will be weighted by value of the freight bill being paid (import pays a much larger portion or fee than ag export), whether it’s a flat fee, or how a calculation is made. One assumes that SSLs have some understanding of where the cost structure breaks ag exports, so one assumes it will be weighted.

In a time that SSGA has had a constant drumbeat on the obligation inherent in conveying goods into the U.S., carrying with it an obligation to provide conveyance for U.S. exports, an overburden of these tariffs placed on the exporter will certainly break their back and create a state of duress for our members.

According to the USTR proposal, there is presumably a credit that is earned against tariffs for placing a U.S.-built vessel into port – I don’t know if the SSLs are creating a mechanism to credit this back, or it’s considered a “windfall” when it happens.

The container exporter is powerless to ascertain or make demands upon an SSL to provide non-China built ships, and/or owned by owners with a very low number of China-built vessels in their fleet, so exporters are price takers, not makers, and will dig out of their wallets accordingly.

What will the final version look like? The elephant keeps repeating “no comment.”

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. 

By Gary Williams, Director of Transportation and Regulatory Affairs

A delegation of SSGA representatives recently visited Washington, D.C., to meet with U.S. Department of Transportation, the Federal Maritime. Commission and other national organizations. The delegation included Tina Lyons, chair of the Competitive Shipping Action Team, SSGA Board Chair Bob Sinner, and Director of Transportation and Regulatory Affairs, Gary Williams.

In meetings with the National Grain and Feed Association (NGFA) and North American Export Grain Association (NAEGA), discussions were held about priorities for the coming year and a recap of progress and events of the past year. Williams and Lyons met with the associations to give updates on our segment of value added and identity preserved grains and oilseeds, particularly on barriers faced in inland equipment availability for export, and our ongoing project in advancing the utilization of the St. Lawrence Seaway as an alternative for container imports and exports. Alejandra Castillo, the Executive Director of NAEGA, will speak at the Identity Preserved International Summit in Honolulu Feb.18-20, about electronic documentation in exports.

The tandem also met with the National Waterways Council to learn of their priorities involving the inland waterways and provide an update on SSGA’s work on the Great Lakes.

SSGA Chair Bob Sinner has spearheaded a consideration with the USDA Sec. Tom Vilsack, involving the Port of Los Angeles, carrier line representatives, rail and numerous agricultural product exporter associations (including SSGA) to discuss potential solutions that might help better provide access for inland agricultural concerns to reach foreign markets, particularly value-added products such as members prevalently are wanting to sell and ship. The meeting of all the layers in the supply chain to discuss this type of transportation barrier was “unprecedented” in either of Sec. Vilsack’s two terms according to the Secretary. Collectively, value was determined to be garnered by advancing the conversations, and SSGA will continue to be involved in the conversation.

Sinner, Lyons and Wiliams met with current Federal Maritime Commission (FMC) Chairman Dan Maffei to discuss the Commission’s expected priorities coming into the administration transition. With Carl Bentzel departing the FMC, a new Commissioner appointed by the President will join the four remaining Commissioners, with the Chairman typically appointed by the President. Current Chair Maffei is planned as a speaker at SSGA’s upcoming Transportation Go! March 12-13 in Minneapolis.

Rounding off the week, Lyons and Williams met with Allison Dane-Camden from the Department of Transportation (DOT) and Adam Tindall-Schlicht and Tony Fisher of the St. Lawrence Seaway (SLS) Administration. They debriefed SSGA’s networking and outreach event in Rotterdam, Antwerp and Amsterdam held in September with the Minnesota Department of Agriculture and association representatives from Minnesota, Wisconsin and Illinois. Peter Hirthe of SLS, Tindall-Schlicht and Dane-Camden were large components of the event educating those that influence transportation decisions on the value of the Great Lakes and the SLS as a consideration for the transportation of their goods, whether importing or exporting. A review of intended next action steps and activities were discussed with DOT and the SLS during the Washington, D.C., meeting as a springboard for discussion as the new Administration takes their place in Washington.