USTR proposal ironically represents grave threat to U.S. port system

John H. McCown, a noted US maritime analyst, wrote in a detailed comment to the USTR of the proposed action, “It is my view that whomever crafted the proposed actions either does not know as much as they should about how maritime supply chains operate or worse yet does not care about how or if they operate.”

The U.S. Trade Representatives’ proposal to curb charge up to $1.5 million for Chinese vessels calling in U.S. ports in an effort to curb China’s maritime dominance and promote U.S. shipbuilding ironically represents a grave threat to the U.S. port system and in turn the nation’s supply chain. If the proposal is enacted as currently presented the result could eviscerate the U.S. state port system, and it is unclear that the proposal will have a material impact on blue-water commercial shipbuilding.

The USTR investigation was opened in April of 2024 at the request of the United Steel Workers and four other unions under Section 301of the Trade Act of 1974. The logic was that this could be a way to rebuild the U.S. shipbuilding industry that has been in decline since the late 1950s. And while U.S. shipbuilding declined, shipbuilding in the Peoples Republic of China (PRC) rocketed upward passing shipbuilding giants like Japan and South Korea on the way to becoming the world’s largest supplier of ships. Subsequently, on February 21, 2025 the USTR formally proposed measures to reduce Chinese-built and operated ship calls in the U.S. via a fee/tax structure and announced a public hearing scheduled for March 24^th. At this writing the public hearing is now underway.

What is the Real Goal: McCown Comments to USTR Jameison Greer

John McCown, Non-Resident Senior Fellow Center for Maritime Strategy, which acts as the Navy League's think tank and the author of the McCown Report, in a March 19^th “Comment” [directed at Federal Register notice dated 2/27/25] outlines in detail the copious errors in logic behind the proposal and offered suggestions that could advance the U.S. for rebuilding U.S. shipbuilding.

To begin with, what is the real purpose of the action? Is it to foster and revitalize U.S. shipbuilding and other maritime activities or something else altogether? A trade barrier?

As McCown wrote of the proposal, “It is my view that whomever crafted the proposed actions either does not know as much as they should about how maritime supply chains operate or worse yet does not care about how or if they operate.” Adding, “This goes beyond imprecise definitional terms and is based on a granular analysis of the trade impact. In fact, one could conclude from the proposed actions that one goal is to be an actual barrier to trade by erecting punitive fees that make trade under those conditions in many situations uneconomical. In their current form, these fees are little more than a different form of tariff but with a bluntness and an array of adverse consequences that makes them worse.”

And McCown isn’t alone in his opinion that the USTR action was poorly conceived. Andrew Abbott, chief executive of ACL (Atlantic Container Line), a ro/ro (roll-on/roll-off) ocean carrier specializing in vehicles and high and heavy freight is an industry veteran whose career has included stints with a wide variety of ocean carriers both foreign and US. Abbot understands the rationale behind the USTR proposal but like McCown is surprised it has seen the light of day. “This was an idea that emanated from the Biden administration. It sounds like Motherhood and Apple Pie: build up American shipbuilding and go after China at the same time. Look at the large number of Democrats in Congress (reportedly 60) that are supporting it. It was cobbled together by people who did not understand how international trade and transportation work. I am a bit surprised that the USTR has given this … proposal the time of day, given the negative impact on American industry.”

The Export Conundrum

One of the reasons for McCown’s questioning the purpose of the fees on Chinese vessels calling U.S. ports is the lack of definition of the entire fee processes.

As McCown writes “… any fees should be used to offset that and to solely benefit the American maritime sector. This needs to be made clear and guaranteed by the establishment of a trust fund.” The lack of regulatory guidelines for the “fee-ports call framework” is to say the least, alarming. And the consequences intended or otherwise stand to be harmful to not only the nominally “Chinese” targeted ships but the U.S. port structure and supply chain.

And as McCown explains in his comments, the fees also impact U.S. exporters because they apply to the ships and the port call, not to the direction of the freight. For example, if an empty bulk carrier or tanker arrives in a port to pick up a cargo of grain, oil or other commodity for export, the vessel would be subject to fees just like the containership unloading boxes of consumer goods made in China. The significance of this indifference would have a major impact on US exporters. The increase in shipping costs on freight largely composed of commodities would hugely disadvantage the competitive position of U.S. agricultural exporters — how could U.S. grain or other agricultural products compete with exports from Argentina, Brazil or Australia? How could mineral exports like coal be competitive on world markets? As Peter Friedmann, executive director of the Agricultural Transportation Coalition (AgTC) has said, “A Chinese hog doesn’t care if his soybeans come from the USA or Brazil.”

And there is question of whether such fees are even legal. As McCown says in his letter, “In I998, the Supreme Court ruled unanimously that the Harbor Maintenance Fee [Harbor Maintenance Tax – HMT] is indeed a tax and not a user fee and it is unconstitutional to apply it to exports. The same logic would presumably apply to this matter with the courts finding any fees charged to empty ships arriving at U.S. ports to carry American exports are illegal.”

Cost and Effect, Winners and Losers

Understanding exactly how and to whom the fee structure and how it applies to the ocean carriers also lacks clarity. How much would the ocean carriers actually pay if the USTR proposal is consummated? McCown’s interpretation is that the fees are three-pronged. “The Federal Register notice states that any fees are cumulative and are based on fees for 1) Chinese maritime transport operators; 2) operators with fleets comprised of Chinese-built vessels; and 3) operators with prospective orders for Chinese vessels.” He believes that the three-prong test is additive combination of the three: “The first prong is a yes or no test, while the second and third prongs are graduated based on broad ranges. Most news stories are reporting on just the fee related to the second prong while ignoring the fees related to the first and third prongs.”

Cumulatively this could boost the costs of a port call for a carrier into the “non-competitive” range where the freight rate and fee-port rate are nearly equal. McCown gives the example that the fee for the port call for COSCO’s vessels West Coast could cost 72% of the freight rate — clearly making the call uncompetitive. And while COSCO hits all three “prongs” the same is nearly true for all the other carriers. In another example, CMA-CGM, McCown explains that the French carrier which has agreed to invest $20 billion in the U.S. maritime sector and triple its U.S. flagged fleet (it owns 10 U.S. flagged vessels operating under the APL banner), would still pay an astounding $2.75 million in calls and “$8.25 million per voyage in transpacific deployments that are most relevant to the U.S.”

In short, very few ocean container ship carriers would escape paying the port call fees. So, what will happen?

Because of the high value of the freight, undoubtedly containership operators would continue to call, and the fees would be passed on through the supply chain ultimately coming to rest with the U.S. consumer. Also, the carriers would find “work arounds” such as calls in Canada or Mexico and even possibly using ports in the Caribbean to act as transshipment ports to relay freight to U.S. ports. Some carriers, like ACL might quit the U.S. trade lanes outright and redeploy on more profitable routes — probably in Asia. However, the larger containership carriers operating in their three ocean carrier alliances along with MSC (Premier Alliance, Gemini Cooperation Alliance and the Ocean Alliance) will severely cut their port calls and concentrate on calls on the larger ports like Los Angeles, Long Beach, New York/New Jersey, Savannah and Houston. At the TPM conference in Long Beach, MSC’s CEO Soren Toft mentioned in his remarks that should the USTR’s proposal be enacted the Port of Oakland would most certainly be skipped, much to the chagrin of the port’s executives sitting in the audience. But they won’t be alone as dozens of small and mid-sized ports will fall victim as ship calls are rerouted.

And the U.S. state port system which performed so admirably in recent crises like COVID and the collapse of the Francis Scott Key Bridge, will rapidly wither under economic pressure and likely become ocean front real estate in metro areas. And with the loss of key waterfront properties, this would signal the collapse of the state U.S. port system.

While as for the goal of resurrecting U.S. shipbuilding, there is a real doubt that the USTR proposal would provide a kick start. There is little indication from the USTR’s proposal that the U.S. shipbuilding industry will become internationally competitive to build blue water commercial vessels — Japan, South Korea, Brazil, Croatia, Poland and others are far more likely to get orders than the U.S. — the costs are simply too high. Just like the costs to U.S. ports should the USTR’s proposal go through.