U.S. to Insure Persian Gulf Shipping, 15% Tariffs, & Judge Rules Importers Owed Tariff Refunds
Trump Orders Government to Cover Persian Gulf Shipping
In Tuesday’s blog about the impacts of the Iran War on international shipping, we brought up insurance, specifically marine insurers canceling war risk insurance.
As I saw someone put it yesterday, if insurers decide a region is too dangerous and cancel war risk coverage or increase premiums to astronomical levels, shipping companies can’t afford to sail their vessels through those regions.
“No insurance means no shipping. Period,” is how the person summed it up.
That’s exactly what’s happened in the Straight of Harmuz and surrounding Persian Gulf. Marine insurers canceled war risk coverage. And what they didn’t cancel, skyrocketed.
20% of the world’s oil gets shipped through the Persian Gulf, so most focus on the tankers and oil shipping there, as that has far reaching implications. But cargo container shipping is obviously impacted too.
With the Lloyd’s of London Market, which dominates maritime insurance and political and war risk insurance in particular, pulling insurance away from the Persian Gulf, President Trump threw the weight of the U.S. government into insuring maritime trade, including shipping lines beyond the oil/energy sector.
On Tuesday, the President posted on Truth Social:
Effective IMMEDIATELY, I have ordered the United States Development Finance Corporation (DFC) to provide, at a very reasonable price, political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf. This will be available to all Shipping Lines. If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible. No matter what, the United States will ensure the FREE FLOW of ENERGY to the WORLD. The United States’ ECONOMIC and MILITARY MIGHT is the GREATEST ON EARTH — More actions to come. Thank you for your attention to this matter! President DONALD J. TRUMP
It is unclear exactly how the government providing political risk insurance, guarantees on financial securities of maritime trade, and Navy escorts will all look and play out. But the government is already engaging with the Lloyd’s of London Market on the matter, according to an article today from Reuters:
The Lloyd’s of London market is engaging with the U.S. government’s International Development Finance Corporation over a plan to provide political risk insurance and guarantees for maritime trade in the Gulf, Lloyd’s market officials said on Thursday.
“Lloyd’s is engaging constructively with the U.S. Development Finance Corporation and relevant stakeholders, with a clear focus on ensuring that the Lloyd’s market continues to lead as the global centre of excellence for war risk insurance,” a Lloyd’s spokesperson said.
…
Insurance broker Marsh said on Wednesday it had met with U.S. officials to explore solutions for restoring maritime trade.
This is a needed development, as the Lloyd’s of London Market had been expanding the area it considers high risk during the Iran War. Jonathan Saul wrote in a gCaptain article:
Guidance from the Joint War Committee, which comprises syndicate members from the Lloyd’s Market Association and representatives from the London insurance company market, is watched closely and influences underwriters’ considerations over insurance premiums.
The JWC added waters around Bahrain, Djibouti, Kuwait, Oman and Qatar to high-risk areas, the statement showed.
The government stepping in to insure oil and cargo shipping through the region seems necessary in the short-term. However, I’m always leery of the government stepping into any industry in the long-run.
15% Tariffs to Take Effect This Week
We don’t know all the details yet, but the implementation of temporary Section 122 tariffs at 15% is about to happen. Andrew Moran reported on it yesterday (March 4th) in an Epoch Times article:
President Donald Trump’s 15 percent global tariff will take effect sometime this week, Treasury Secretary Scott Bessent said.
Immediately after the Supreme Court ruled against the president’s IEEPA-authority-based tariffs, Trump turned to Section 122 of the Trade Act of 1974 to implement a broad 10% tariff on imports. He then said he’d be raising 10% tariffs to 15%, but up to this point, we hadn’t seen the implementation of that 15%. We’ll be watching as the implementation details now unfold.
Those tariff implementation details will likely be the topic of one of Universal Cargo’s blog posts next week. Speaking of tariffs…
Court Ruled Companies Are Owed IEEPA Tariff Refunds
Many shippers will be happy about this one. A federal court ruled companies are entitled to refunds on the IEEPA tariffs the Supreme Court ruled against.
Kimberly Hayek reported on it in the Epoch Times:
A federal judge ruled Wednesday that companies are owed refunds for tariffs imposed by President Donald Trump that were later overturned by the Supreme Court.
The U.S. Court of International Trade handed down the ruling in a case filed by Atmus Filtration Inc. It applies to all importers of record for goods subject to the duties, which were implemented via executive orders under the International Emergency Economic Powers Act (IEEPA).
While the ruling sounds broad to cover all IEEPA tariffs the government collected, the exact process for how and when refunds will be applied for and awarded is yet to be clarified.
