USTR hears comments on port fee proposal

A number of associations, unions and companies are commenting on actions the U.S. Trade Representative (USTR) has proposed in connection with the Section 301 investigation of China’s targeting of the maritime, logistics and shipbuilding sectors for dominance. The USTR hearing began March 24 and continues March 26.

The USTR issued a set of remedy recommendations Feb. 27 in response to a petition five unions filed March 12, 2024. The USTR charges that certain acts, policies and practices of China prevent the U.S. commercial shipbuilding industry from competing internationally.

The USTR has proposed enacting multiple stacking levies that could cost millions of dollars on Chinese-made ships when they arrive at American ports. The proposal also would require that a rising percentage of American goods be exported on vessels owned by a U.S. company and registered in the United States, with 1 percent required in the first year of the program to 15 percent in the eighth year.

These fees are intended to reduce China’s global dominance in shipbuilding and maritime logistics and encourage the development of U.S. shipbuilding. They also would apply to vessels manufactured elsewhere if they are operated by carriers with fleets that include just one Chinese-made ship. 

The proposal includes a requirement that a certain percentage of American exports be transported on “U.S.-flagged, U.S.-operated and U.S.-built” ships, rising from zero in the first three years of the program to 3 percent in the fourth year and 5 percent in the eighth year.

The Chamber of Marine Commerce (CMC), based in Ottawa, made recommendations March 24 at the hearing.  

The CMC is a binational association that represents marine industry stakeholders, including major Canadian and American shippers, ports, terminals and marine service providers, as well as Canadian domestic ship owners. The chamber advocates for what it describes as safe, sustainable, harmonized and competitive policy and regulation that recognizes the marine transportation system's significant advantages in the Great Lakes, St. Lawrence, Coastal and Arctic regions.

“The CMC welcomes the concept of a stronger U.S.-based shipbuilding industry and is keen to help the U.S. government achieve its intended goals of protecting Americans from excessive foreign influence while growing the economy through enhanced shipbuilding,” CMC President and CEO Bruce Burrows says.

“As part of our offer to help, we recommend that the USTR proposal be refined to better achieve its intended goals while avoiding any unintended outcomes. The best way to do that is to add language that protects in-land and coastal shipping—a critical link in the integrated American supply chain, at least while domestic shipbuilding capacity ramps up. Doing so will help avoid any unnecessary negative outcomes for American businesses and consumers in the near term that could spur negative public sentiment and thus complicate efforts to strengthen domestic shipbuilding.”

The “laker fleet” represented within CMC’s membership comprises specialized vessels uniquely designed to navigate the seaway locks found throughout the Great Lakes and St. Lawrence Seaway system. These short and narrow self-unloading vessels are purpose-built to carry bulk cargoes, such as grain, iron ore, concrete and road salt, that are foundational to American’s quality of life at the lowest possible cost. The CMC says the expertise and capacity needed to make these purpose-built laker vessels currently exists overseas, and it is likely that these unique vessels operating exclusively in coastal, inland and arctic waters were not contemplated within the more familiar context of larger, transoceanic container vessels.

However, if language is not added to the USTR proposal to protect them, they would be subject to fees that would either rapidly drive up the cost of living to unsustainable levels or make vital cargoes suddenly and entirely unavailable, the CMC claims.

Through research provided by independent expertise, the CMC says it has determined that without additional language protecting inland and coastal marine shipping, the USTR proposal as currently worded would put at risk $4 billion in economic activity, 26,000 U.S. jobs, 30 million metric tons of cross-border trade and activity at U.S. Great Lakes ports as importers can be expected to reduce their use of some ports and instead ship into Mexico and Canada and then use trucks and rail to deliver into the U.S.

“The main takeaway we hope to leave with the USTR after these hearings is that our marine shipping industry wants to take full advantage of the opportunity presented by this proposal,” Burrows says. “However, to do that we need to engage in partnership that maximizes domestic benefits and prevents serious and avoidable negative outcomes. Chamber of Marine Commerce members would be the clients and primary stakeholders in the growth of U.S. shipbuilding, so we simply ask the U.S. government to work with the intended customer base to achieve mutual success.” 

The CMC was among 62 organizations across 14 panels set to testify about the proposed fees.

Patrick Bloom of Cleveland-Cliffs Inc. and Brad Ford of Nucor Corp. were among those testifying March 24 in support of the proposal, while Kevin Dempsey, president of the American Iron and Steel Institute (AISI), Washington, submitted comments March 24 that read in part: “The proposed actions, such as requiring an escalating percentage of U.S. products to be exported every year on U.S. flagged ships, will not only help curb the use of Chinese built ships, but drive demand for domestically produced ships as well. This will directly benefit the American steel industry as one of the primary suppliers of critical raw materials in the American shipbuilding supply chain. Additionally, AISI would suggest the administration take action to strengthen the requirements to use domestically sourced raw materials like steel in U.S. shipbuilding.”

Dempsey also writes, “AISI and its member companies strongly support efforts to address China’s unfair trade practices targeting the maritime, logistics and shipbuilding sectors, and our members are well-positioned to provide the critical steel products needed to revitalize American shipbuilding.”

Adam Shaffer, vice president of International Trade and Global Affairs at the Recycled Materials Association, Washington, is testifying in place of ReMA President Robin Wiener today.  

ReMA shares with Recycling Today that Shaffer will offer ReMA’s support for the Trump administration’s efforts to rebuild U.S. shipbuilding capacity and will highlight the vital role that recycled materials will play in supplying critical inputs that are essential for a shipbuilding renaissance in the U.S. He also will urge the proposed fee structure be reconsidered as it could have significant adverse impacts on U.S. exporters, including recyclers. His testimony will highlight that more than 70 percent of U.S. exports of recycled materials transit beyond North America and could be affected by these proposed fees. Shaffer also will urge the Trump administration to include a waiver of these fees for vessels that export from the U.S. and help to reduce the U.S. trade deficit.

The United Steelworkers, one of the unions that approached the USTR asking for a remedy, also testified.

When the USTR published its proposal in February, United Steelworkers International President David McCall released a statement that reads:

“The USW and our partners welcome the opportunity to submit comments on the USTR’s proposed relief measures as we seek to rebuild our domestic shipbuilding industry.

“Our union, alongside the International Association of Machinists and Aerospace Workers, the International Brotherhood of Boilermakers, the International Brotherhood of Electrical Workers and the Maritime Trades Department, AFL-CIO, last year identified an array of policies promoted by the Chinese Communist Party that have undermined U.S. maritime, logistics and shipbuilding capabilities, resulting in tens of thousands of lost jobs across our shipbuilding supply chains and destabilizing our economic and national security interests.  

“The USTR under the previous administration investigated and confirmed our allegations. Now, the current USTR identified potential relief measures, which respond to China’s predatory policies and support the utilization of U.S. flagged and built vessels.

“Our union stands in support of efforts to hold China to account and reverse the decline in U.S. shipbuilding capabilities. As we submit comments on the proposed relief measures, we will continue to work with the administration and Congress to restore our nation’s maritime power and the good, community-sustaining jobs that underpin it.”

According to a study commissioned by a coalition of farmers, manufacturers and retailers, logistics and transportation services providers prepared by Trade Partnership Worldwide LLC, Washington, “Overall, the proposed remedies would have a net negative impact on the U.S. economy. Each option examined would subtract from U.S. output at a time when the administration is seeking to grow the economy [at] an annual rate of 3 percent. For every remedy option examined, U.S. exports would decline, potentially contributing to a worsening of the U.S. trade deficit.

“While the U.S. shipbuilding industry (manufacturers and workers) would benefit from the remedy proposals, many other sectors of the economy (farmers, manufacturers and services providers, including their workers) would be harmed, and frequently significantly so.

“U.S. agriculture exporters and workers would be particularly hard-hit, with exports of major agriculture products like wheat, rice, corn, oilseeds and cotton dropping dramatically—by double digits in the cases of wheat, rice and soybeans. U.S. exporters will lose competitiveness to exporters in Brazil, Canada, Russia and Australia.

“Important energy exports like coal, oil, natural gas and goods exports from numerous manufacturing industries would also suffer declines in output and employment because of increased shipping costs and reductions in trade.

“U.S. ports and related sectors would experience net negative impacts on both output and employment. 

“As the impacts of the remedies filter still further along supply chains, U.S. manufacturers, importers and retailers would feel the effects. Wholesale and retail trade, hospitality and consumer services industries and other supply chain stakeholders would all experience declines in output,” according to the study.