Letter from the Editor

By Mark Szakonyi

The per TEU cost of drawing the White House’ s ire is steep

The revised US plan to tax Chinese tonnage released last month is staggeringly less disruptive to the shipping industry than its February version, but still stands to increase shipping costs.

Most container lines will be on the hook for $ 1 million per voyage, a significant climbdown from the $ 1 million to $ 1.5 million per port call initially outlined when the plan was introduced by the US Trade Representative( USTR) on Feb. 21. That plan would have cost the industry $ 24 billion, according to maritime analyst Lars Jensen.

“ It’ s definitely a vast improvement over the first version,” said Stuart Sandlin, Hapag-Lloyd’ s North America president, adding that the original plan would have cost the carrier nearly $ 90 million weekly.

Industry backlash to the original proposal came on multiple fronts. Agriculture exporters warned of additional pass-through costs, and smaller ports fretted about lost services if fees were assessed per port call. Central American, Caribbean and niche vessel operators testified to being unable to spread the stiff port fees across their smaller cargo capacity, while major carriers lobbied in the backroom.

Federal Maritime Chairman Louis Sola said the agency also helped the USTR understand the implications, with ultimately all of its recommendations implemented in the latest version.

“ We put our fingers on the scale to minimize some of the impacts on the industry that were not contemplated in the original proposal,” Sola said in a May 8 interview, stressing that it was an industrywide effort.

The revised version exempts Chinese-built ships in US-flag fleets, container ships that are 4,000 TEUs or smaller, voyages of less than 2,000 nautical miles and Chinese-built ships owned by US-based carriers.

Carriers will be levied solely on the first US port calls rather than on each US call, and tonnage taxes are capped at five sailings annually. Equally important, carriers will no longer be penalized come October for having Chinese-built vessels in their fleet, only for the Chinese-built vessels they deploy on US trades.

The modification to the tonnage tax plan incentivizes carriers to remove China-built ships from US trades and replace them with vessels constructed in South Korea and Japan.

“ We do have options, and we are evaluating those options as we speak,” Fabio Santucci, president of US operations for Mediterranean Shipping Co., said at the Georgia International Trade Conference in late April.“ Implementation is October, so I really think everybody has plenty of time to adjust and plan.”

So far, it looks like MSC will not have to undergo too many changes to accommodate the new fees. Only two of the nine ships deployed on its Asia – US West Coast Pearl Shikra service are Chinese-built. The carrier’ s two other West Coast services primarily use South Korean-built vessels, along with a few Japanese ones.

Other carriers, though, may have more work to do to mitigate the fees. Five of the 12 ships currently in the Gemini Cooperation’ s US2 service to the US East Coast are Chinese built, with those under long-term charter by Gemini partner Hapag-Lloyd.

CMA CGM and Zim Integrated Shipping Services say they will remove China-built tonnage from US services, with the former, along with Maersk, saying they didn’ t expect to pay any tax.

Cosco and OOCL don’ t have the same ability to swap out China-built vessels and face tariffs more than twice as large as their peers.

The USTR doesn’ t mince words on its goal, saying the aim is“ to further disincentivize use of Chinese shipping services.” Cosco and OOCL handle the largest share of the trans-Pacific market, accounting for 16.5 % of US import in April, according to PIERS, a sister company of the Journal of Commerce within PIERS.

The per TEU cost of drawing the White House’ s ire is steep. Consultancy Bluspark estimates the tonnage taxes over the next three years will equate to between $ 550 and $ 1,600 per TEU for Chinese operators, compared with a $ 175 to $ 400 per TEU ramp-up for carriers not domiciled in China.

That could spur Cosco and OOCL to lean on their Ocean Alliance partners CMA CGM and Evergreen Line. In such a scenario, Cosco and OOCL would shift their trans-Pacific vessels to other trades while keeping access to the US market through their vessel sharing agreement with Evergreen and CMA CGM.

President Donald Trump’ s effort to galvanize US shipbuilding and knock China for subsidizing its own industry may change what ships call the US, but it doesn’ t seem to be denting Chinese shipyard production. Of the 93 container ship orders placed with Chinese shipyards this year, 62 were placed since the February release of the original tariff plan, according to an HSBC analysis released in early May.

email: mark. szakonyi @ spglobal. com

4 Journal of Commerce | June 2, 2025 www. joc. com