Smart shipowners are preparing to pass on any additional US dues for Chinese vessels to their charterers, insulating the owner from the impact of millions of dollars in additional regulatory costs for entering the port. According to Genco CEO John Wobensmith, special new provisions for charter agreements will ensure that US exporters and importers, not shipowners, will bear the additional near-term costs.
Genco is the largest U.S.-based bulk carrier and has a significant number of Chinese vessels in its fleet. As such, it is subject to the proposed port dues on Chinese tonnage written by the Office of the U.S. Trade Representative (USTR). If the dues structure is adopted as written, Chinese-built vessels and any global operators that use Chinese-built vessels elsewhere would have to pay millions of dollars for each call at a U.S. port. Exporters would also be required to ship an increasing percentage of their goods in U.S.-flagged tonnage and, eventually, in scarce U.S.-built tonnage, raising the cost of export shipments and creating new employment opportunities for U.S. seafarers.
Several shipowners have described major changes to their businesses if the dues go into effect. ACL, a U.S. liner, said it would cease operations in the United States, and several ocean carriers said they would narrow their port calls to a few key gateways to minimize fees. Genco’s Wobensmith told Bloomberg that he shares the USTR’s goal of strengthening U.S. shipping, but in the short term his firm has two options: exit the U.S. market and focus on the rest of the world, which accounts for 90 percent of its business; or pass on the additional U.S. costs to the end user.
He is already using the latter strategy. To avoid unexpected new costs, Genco’s charter agreements now include provisions requiring the charterer to pay any new U.S. port dues, whatever they may be.
In fact, the two strategies (stay or pass on the charges) are closely related. The additional port fees will make some agricultural products “uncompetitive” with foreign producers, Wobensmith said, as U.S. farmers’ representatives have previously warned. He said soybean exports “will almost cease.” For these cargoes, the additional transfer fees could shut down the market, forcing shipowners with Chinese tonnage out of the market.