Fuel for Thought: Port fees on Chinese-built ships not seen revitalizing US shipbuilding industry

The US Trade Representative’s proposed plan to revitalize the US shipbuilding industry involves steep fees targeting Chinese-built ships, but no stated initiatives to invest in shipyards, recruitment and training for workers or new technology.

Overwhelmingly, US producers, exporters, and importers across commodities say the proposed port fees will crush their businesses, prompt shippers to limit US dockings and divert ships to Canada and Mexico without denting China’s global shipping dominance.

“The burden of the tariff will fall primarily on US manufacturers like Alcoa, not China,” the global producer of bauxite, alumina and aluminum products said in one of more than 500 comments from companies, associations and businesses submitted to the USTR in February, March and April. “Alcoa -- and companies like it -- will be penalized simply for operating in a vessel shipping market with limited alternatives.”

Governments impose tariffs to gain economic leverage to protect homegrown industries. Tariffs are taxes on imports that, in theory, will make them more expensive than domestic products and prompt customers to buy domestic -- unless domestic prices rise as well.

However, the proposed port fees aren’t a typical tariff imposed on a product; here, the product is the vessel in which cargo arrives at US ports. If the ship was built in China, the operator would pay up to $1.5 million per docking. If the operator docks a non-Chinese-built ship but has Chinese-built ships in its fleet, it would pay up to $1 million per docking. Operators face even more fees based on how many ships they have on order at Chinese shipyards to be delivered within two years of the fees being imposed.

US Trade Representative Jamieson Greer told the US Senate Finance Committee April 8 that not all of the proposed fees will be implemented, and they may not be imposed on top of one another.

As proposed, those fees have left industries angry and fearful of losing not only jobs and companies but also watching price advantages of US exports that stem from upstream production costs disappear.

“This action will slam the brakes on oil and gas production as the fees are onerous and make the US immediately uncompetitive,” said Enterprise Products Partners, a major US midstream company that exported more than 70 million barrels of hydrocarbons in December 2024.

In 2024, the US produced more than 20 million b/d of liquid hydrocarbons and exported 10.757 million b/d, more than half of that output, Enterprise said. The US also produced 105 Bcf/d of natural gas in 2024. Of that, 20 Bcf/d was exported, 7 Bcf/d via pipeline and the rest via ship. And 20% of US-produced ethylene derivatives, like plastic pellets that are used to make anything from grocery bags and shampoo bottles to plastic vehicle parts and vinyl siding, are typically exported via container ships.

“This would stymie those exports,” Enterprise said.

Agriculture exports 'will suffocate'

The proposed fees also would require more exports to exit the US on US-built and US-flagged vessels, reaching 15% in seven years.

However, Enterprise noted there are no US-flagged ships that move liquefied petroleum gas, or LPGs like propane and butane. There are no US shipyards capable of building the largest container ships that can carry 20,000 containers, known as twenty-foot equivalent units (TEUs), or liquefied natural gas (LNG) carriers. In the global fleet of 8,883 tankers, 64 are US-flagged, or 0.7%.

Concerns spread across a wide gamut of commodities exporters, including those in agriculture, such as grain, cotton, soybeans and more. The American Soybean Association said more than half of US soybean production is exported, and the lack of US shipbuilding capacity to handle that outflow rate would leave US soybeans “effectively shut out” of global markets.

Zippy Duvall, president of the American Farm Bureau Association, took that thought a bit further: “Forcing exporters into an artificially constrained system will not bolster American agriculture -- it will suffocate it.”

Why? Importers and exporters would be expected to pass them down to consumers or just lose business if ships limit US dockings to larger ports while leaving smaller ones to flail. There are too many Chinese-built ships on the water globally to just switch them out with non-Chinese-built vessels, especially with fees proposed for companies that have Chinese-built ships in their fleets that don’t dock in the US.

US just 0.1% of shipbuilding

And while companies, associations and industries largely commend the goal to revitalize the US shipbuilding industry, most say the proposed fees won’t do it.

“The US cannot build a vibrant shipbuilding industry from its current capacity in seven years,” said the American Association of Exporters and Importers.

The US has never built a chemical tanker of stainless steel with multiple segments to carry different chemicals, the AAEI said. The US has no pipeline for building a container ship that can carry more than 3,600 TEUs when container ship sizes have been growing far past that capacity since the mid-1980s.

Bottom line? For more than three decades, China, the world’s second-largest economy, has focused on dominating not only global shipbuilding but also most major equipment used at worldwide ports. China financed these efforts with government money and cheap labor, which enticed industries to relocate much of the world’s manufacturing there in the decades since World War II.

Over those same decades, US shipbuilding shrank. As of 2023, 94% of the nearly 64.8 million gross tons of global shipbuilding tonnage was in three countries: China, South Korea and Japan, according to the United Nations Trade and Development. China accounted for 51% of that global shipbuilding tonnage, while the US held only 0.1%, or nearly 65,000 gross tons.

While companies, associations and industry groups that submitted comments to the USTR or testified at one of two March hearings were largely unified in saying hefty port fees for ships purchased decades ago or ordered from Chinese shipyards years ago isn’t the way to rebuild US shipbuilding.

Restoring a US industry to its former glory will take 10 to 20 years to acquire the necessary workforce, modern fleet technology and expertise, and a commitment to tax incentives -- or subsidies -- to keep selling costs competitive globally. In the meantime, companies and industry groups have encouraged the USTR to fully assess the economic fallout from fees on other US industries.