The introduction of new Chinese port fees targeting vessels with partial US ownership has created significant confusion and immediate operational challenges for US-listed shipping companies.
Overview of the New Chinese Port Fees
The new port fees came into effect immediately on a Tuesday, only four days after being announced. The fees are potentially millions of dollars per port call and are aimed at vessels deemed to have 25% US ownership. The lack of clarity on how “25% US ownership” is defined and applied has been the primary source of the turmoil.
Industry Reaction and Immediate Fallout
Executives speaking at the Capital Link New York Maritime Forum recounted a frantic race to understand the rules and limit financial and operational damage.
- Confusion on Ownership Criteria: Shipping executives stated they still did not know how Chinese port officials would determine if a vessel was 25% US-owned and therefore liable for the fee. Questions, such as the treatment of dual-passport holders, remained unanswered due to the “intentionally vague” nature of the regulations.
- Operational Scramble:
- Speeding to Port: Executives like Hamish Norton of Star Bulk described immediately running ships “at 14 knots, which was as fast as they could go,” to try and get into port before the Tuesday deadline.
- Cancelled Calls: Maersk Line Limited (USA), Maersk’s US subsidiary, cancelled its scheduled call to Ningbo for its US-flag service. The CEO, William Woodhour, stated the fee would cost the company $2.5 million a week or an additional $100 million a year, which is “not really sustainable.”
- New Customs Form: Shipowners did not receive the official customs form from Chinese authorities until Tuesday, the very day the fees went into effect, making compliance a “nightmare.”
Strategic Response and Exemptions
In an immediate attempt to comply and reduce exposure, some companies took drastic, same-day measures.
- Board Changes: To reduce the percentage of American directors, several US-listed companies made abrupt board changes:
- Danaos Corporation announced the resignation of American board member William Repko.
- Okeanis Eco Tankers announced the resignation of Americans Robert Knapp and Joshua Nemser.
- DHT announced the appointment of Norwegian Svein Moxnes Harfjeld.
Impact of the Chinese-Built Ship Exemption
A key provision that provided some relief to many US-listed companies was an exemption for Chinese-built ships, even if the operating entity met the 25% US-owned threshold.
- Market Volatility: The market reacted swiftly to the news:
- The Baltic Exchange’s capesize index initially shot up 23% between the announcement on Thursday and the following Monday.
- Following the news of the exemption for Chinese-built bulkers, the capesize index dropped 14%.
- Company Exposure: Companies whose fleets were largely built in China expressed confidence in avoiding the fees:
- Star Bulk: President Hamish Norton noted that “Two thirds of our fleet was built in China.”
- Navigator Gas: Head of business development Randy Giveans stated that 45% of their vessels were built in China, including all their ethane and ethylene vessels.
- International Seaways: CEO Lois Zabrocky confirmed that the majority of their largest exposed vessels (VLCCs) on the spot market are Chinese-built, making them exempt.
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Source: Lloyd’s List
