Carriers Won’t Pass Chinese Ship Fees on to Shippers

There’s some good news for shippers’ bottom lines where many were worried. Next month, the United States Trade Representative (USTR) will start collecting fees on China-built ships and Chinese carriers calling on U.S. ports. That’s obviously not the good news. The good news is carriers are saying the fees won’t result in service reductions, surcharges, or general rate increases (GRIs) for shippers to cover the fees carriers will face.

While the new Chinese ship fees aren’t nearly as large as the USTR initially proposed, they are still very significant. Before the USTR took international shipping industry feedback and adjusted its proposed Chinese ship fee, estimates put costs on affected ships at $1M – $1.5M per U.S. port call for ocean freight carriers. Estimates for the reduced fees place the costs at around $1M per voyage on affected ships for carriers.

Even with the enormous cost reduction, many worried the extra costs might be passed on to shippers and/or shippers might see reduced services as carriers adjusted sailings to reduce the impact of the fees.

Already, some carriers have made adjustments to reduce the number of China-built ships calling on U.S. ports. However, the fleet adjustments don’t appear to be significantly impacting the amount of available services for shippers. And carriers have been reassuring shippers that despite operational adjustments, service won’t suffer. However, for some carriers there’s no way to really mitigate the costs of the upcoming fees.

Non-Chinese carriers can adjust their fleets to remove China-built ships from calls on U.S. ports. For Chinese carriers, it wouldn’t matter what ships they use to call on the ports, they will face the fees. In fact, their fees are higher than non-Chinese carriers’ fees who utilize China-built ships at the port. Thus, the Chinese state-owned carrier COSCO is looking at higher fees that competitors like Maersk, MSC, and CMA CGM.

Michael Angell lays it out nicely in a Journal of Commerce (JOC) article:

As a China-based carrier, Cosco does not have that option under the USTR’s action, which assesses a higher penalty for Chinese carriers than for Chinese ships. Cosco, along with its OOCL subsidiary, face a $50 per net ton fee for any of their vessels on their first port call to the US, up to five times per year. The fee rises to $140 by 2028.

In contrast, a Chinese-built ship operated by a non-China domiciled carrier only faces an $18 per net ton fee in the first year of the USTR’s penalty scheme, rising to $33 by 2028.

Investment bank HSBC estimated that a Chinese-operated ship of 10,000-TEU capacity would pay $2.7 million for its first US port call in the first year of the new fees, equating to a roughly $600 per container fee. A Chinese-built ship of similar size faces a $1 million fee, or roughly $222 per container.

Based on the number of US calls per year, HSBC estimated Cosco could pay $1.5 billion in USTR fees through 2026.

Thus, it’s not surprising shippers would fear big surcharges or GRIs on their cargo containers from carriers trying to cover this cost. But Cosco insists it won’t do that. Nor will it reduce its service. In fact, that’s the headlining topic of the JOC article by Angell, who writes:

While the new fees “may pose certain operational challenges,” Cosco said it does not plan to remove any trans-Pacific services, reduce its US ship deployment, or impose new surcharges to cover the fees.

This has been a theme among carriers, as Angell reports:

Cosco Shipping has informed its US customers to expect little change in its services and rates as the carrier starts paying new service fees for US port calls in October, becoming the latest container line to signal it will absorb the Trump administration’s penalties against China’s maritime industry.

You might think Cosco will be at a competitive disadvantage to the major carriers it competes with that are based outside of China. However, it’s the unfair advantage that Cosco, its parent company OOCL, and Chinese ship-builders have that caused the Trump Administration to create these fees. Even though Cosco’s fees will be larger than the fees its competitors from around the world will have, Cosco is still likely in a better place to absorb them.

China subsidizes its companies in the international shipping industry to the tune of billions of dollars. It does so to such a point that an investigation into it by the Biden Administration found China’s practices in regard to the international shipping industry to not only be unfair but to be “predatory.”

That’s one of the reasons that while the Biden Administration tried to undo everything the first term Trump Administration did, seemingly regardless of efficacy, the Biden Administration did not remove the first Trump era tariffs on China. In fact, by the end of President Biden’s term in office, his administration added to them. The revenue the tariffs created probably played into the reasoning for leaving them in place, but China’s unfair international trade practices undoubtedly factored in too.

Angell cites the USTR investigation with estimating that between 2010 and 2018, China gave $3.4 billion in subsidies to its major carriers and port operators. Angell then cited Cosco’s own last annual report as listing $169 million in subsidies in 2024 and $423 million in subsidies in 2023.

Angell begs the question of whether the Chinese government will offset the new port fees through subsidies. I don’t think there’s any question. The Chinese government’s history of subsidies shows that it absolutely will.

The question is still whether shippers will eventually see an increase in shipping costs because of these fees. In an otherwise level playing field, carriers from countries other than China would be able to charge lower fees to shippers than Chinese carriers to offset the port fees. Of course, if the playing field was even like that, these fees wouldn’t exist. As it is, Chinese carriers can completely offset the fees with government subsidies. That may be why non-Chinese carriers are also choosing to absorb the fees while adjusting their fleets and fleet usages to minimize the fees. It would be hard to win a pricing war against the Chinese government backed, owned, and subsidized carriers.

It will still be worth monitoring data to see if some increase in shipping costs for shippers does result from these Chinese ship fees. However, that could turn out difficult to determine, as carriers may indicate other causes for future increases in freight rates when the fees could be, at least, a contributing factor. But at least for now, shippers shouldn’t have to worry about freight rates spiking or service falling next month due to the new fees going into effect.