Local shipper warns against “catastrophic” $1.5M fee on Chinese-built vessels
John Wight, Chairman of Bermuda Container Line, told US officials they would be forced to terminate business operations if proposed million-dollar port fees are implemented as written.
The fees would almost triple shipping costs, he said.
In February, the Trump Administration proposed an up-to $1.5-million entry fee for any Chinese-built vessel entering a US Port.
This follows a United States Trade Representative (USTR) investigation that determined China had unreasonably targeted the maritime, logistics and shipbuilding sectors.
China now holds more than 50% of global shipbuilding tonnage, and controls 95% of the production of shipping containers.
Bermuda Container Line’s vessel, the Oleander, was built in China and launched in 2018.
At a public hearing in the US last week, BCL Chair John Wight told a USTR panel that the proposed port fees would be “catastrophic” for both BCL and Bermuda.
He said, “for a company with $30 million in annual revenues, with a net income of roughly $1 million, the additional financial cost to our company would amount to $76 million.
“BCL would be forced to terminate its business operations.
“It would be impossible to absorb the new fees and impossible to pass on the costs of the fees to our customers – almost tripling their current shipping costs.
“BCL recognizes and respects the United States’ right to take action against unfair trade practices. However, we urge the USTR to consider creating exemptions for small island countries, such as Bermuda”.
When asked for an example of such an exemption, Mr Wight proposed a per-container charge rather than an overall fee per vessel, which he said could potentially be absorbed by the company and/or customers.
Meanwhile, the USTR Section 301 proposal would also mandate the increased use of US operated-and-flagged vessels for the export of US products.
Howard Pitcher, representing North Florida Shipping which serves the Somers Isle, told the USTR panel that the vessel was built in China but completed in Europe. If the proposed fees hit them, he said, it would put them out of business and 900 working people would lose their jobs.
He also suggests that trying to drive more shippers to use or order US-flagged vessels is unrealistic at this time.
He told the panel that the proposal “doesn’t provide a sustainable solution to the lack of US-built ships. It will take years, if not decades, to create enough US flag vessels to meet the demand.”
Current shipbuilders are generally building vessels much larger than Bermuda’s carriers require. John Wight said the largest container ships globally are roughly 50-times the size of the Oleander.
Mr Pitcher told the USTR panel that a small Gulf Stream feeder vessel they designed in 2010 was going to cost 8-to-$10 million to build in China, 12-to-$15 million to build in the Netherlands, or 45-to-$50 million to build in the US.
He continued, “my preference would be to see a US-built flag vessel on our route to Bermuda, but the reality is that such a vessel would be five times more expensive, making it financially unfeasible at this point in time.”
“…while the intended intention behind 301 is to strengthen national security, the consequences could be catastrophic for small ports, American workers or international trade.”
We understand the USTR must issue its final proposal on or before April 17th.
Shipping companies respond to US proposals
Bermuda Container Line published a release which states that they are taking the USTR proposals very seriously, and communicating with the USTR and local Government to monitor the situation and explore contingency plans.
While the outcome is unclear at this stage, the statement reads, “any adoption of the proposed rules is likely to provide disruption to Bermuda’s economy, as approximately 90% of all goods received in Bermuda arrive on the island’s three container ships, with BCL’s M.V. Oleander the largest of the three ships.”
Meanwhile, the Bermuda Islander is Dutch built and flagged, and its transshipment partners are also European built and flagged, so the port fee proposals won’t impact them.
However, the mandate to increase US exporting on US vessels could be a larger issue for Bermuda and the Caribbean. This, according to Greg Henry of Voight Maritime, Bermuda International Shipping’s US Agent partner.
He says, “these vessels don’t exist at this time and would take many years to build at exorbitant prices.
“We are now standing by with the rest of the shipping industry waiting for the USTR’s ruling.”
Bermuda Container Line Press Statement:
”Bermuda Container Line (“BCL”) is aware of the SHIPS Act (the Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act), which is designed to create a U.S. national maritime strategy. The legislation is currently in the commentary phase with the United States Trade Representative’s office (“USTR”), and BCL was able to participate in last week’s public hearing in Washington D.C.
“BCL is taking the proposed application of port fees on Chinese built, and non-U.S. built vessels very seriously, and is communicating with all relevant agencies, including the USTR and local Government officials to monitor the situation, while exploring all possible contingency plans to maintain service continuity.
“While the outcome of the SHIPS Act is unclear at this stage, any adoption of the proposed rules is likely to provide disruption to Bermuda’s economy as approximately 90% of all goods received in Bermuda arrive on the islands three container ships, with BCL’s M.V. Oleander the largest of the three ships.”
