(Trinidad Guardian) The US Government’s proposal to impose huge fees on Chinese-built or Chinese-flagged vessels docking at US ports could increase the cost of freight to the Caribbean by between 50 and 60 per cent, which could result in higher prices on imported goods of 15 to 20 per cent.
That is the analysis of the CEO and technical director of the Caricom Private Sector Organisation (CPSO), Dr Patrick Antoine, who also argues that T&T’s energy exports could be “hit hard,” if the US fees are fully implemented.
The Office of the US Trade Representative (USTR) is considering the imposition of: a fee of up to US$1 million on Chinese vessel operators for each entry to a US port; a fee of up to US$1.5 million on shipping companies with fleets comprising Chinese-built vessels; and a fee of up to US$1 million on companies that have orders for Chinese ships.
Antoine said one of the implications of the USTR going ahead with its schedule of new fees on shipping is the rising cost of imports as a consequence of the severity of the fines.
Noting that maritime transport accounts for more than 90 per cent of Caricom’s trade in goods, he said countries in the region are on a seven-day (one week) shipping cycle for imports.
“So if you wait for 52 times the vessels are in and out of Caricom and ports in the US. That means that if you were to take the minimum finding to account for a company that has even one Chinese vessel in its fleet, you’re talking about US$1 million dollars per visit into a US port.
“So you’re talking about potentially US$26 million minimum in additional fees.”
Antoine said because Caricom countries are small, they engage in a practice called called short-sea shipping, in which vessels typically that have 200 containers. If the proposed USTR fees are spread over 200 containers, the cost per container is likely to be between US$2,000 and US$4,000 in additional fees.
“And unlike COVID, it’s not going to go away. It’s going to stay. And that’s going to have a massive impact on the cost of living and inflation in the country,” said Antoine, who has a PhD in international finance, economic policy and international trade.
He said the second effect is for goods that the region imports, adds value to and then exports back to the US. The regional technocrat cited the example of imports of wheat or corn that are used to manufacture a range of goods that are exported. He said the USTR fees would apply on the imports of the commodities and exports of the manufactured goods.
“Whatever goes back into the US, the vessel will pay again. It pays when it leaves, if it’s a company which has one China built vessel in the fleet, and it pays when it goes back in with the finished product.
“We call that intra-industry trade, where the trade takes place in the same broad category, but the specific nature of the product may be different. So that means that for intra-industry trade, we get hit very heavily,” Antoine said.
He said the third impact would be on he described as “pure exports.”
He said T&T’s petrochemical sector has a unique problem, which is “not going to be spared for companies that have Chinese-built vessels.” These companies that export products like Urea Ammonium Nitrate (UAN), ammonia, methanol or crude are going to be hit hard.
“And the wicked thing is that while we export these products, we also import petroleum products. The petroleum products, if exported on a vessel that that is not US flagged would also get hit by these fees. So we are going to get hit by a double whammy, with good going into the US facing the additional fees and products from the US back to us, also facing the fees,” said the economist.
Questioned on whether the competitiveness of Point Lisas petrochemical companies would be impacted if the USTR measures are fully implemented, Antoine pointed to two possible impacts.
He said companies that have take-or-pay contracts, which means that all of the shipping costs are already built in and cannot be passed on, are going to face “tremendous pain” as a result of the additional shipping fees.
“The price is either going to be borne by the consumer, in which case we become less price competitive relative to the competition. So I can see massive implications for exports from the Point Lisas Industrial Estate, just for having Chinese-built assets, or having assets on order with Chinese ship building companies, or for products coming out of the US that are not carrying on a US flag carrier,” he said.
The CEO of CPSO also pointed to a possible scenario in which companies could face aggregated fees of up to US$3.5 million per port visit. This could occur if a product is being exported on a non-US flagged vessel, has at least one vessel in their fleet that is Chinese, and has a vessel on order from a Chinese company.
The proposed, additional shipping fees could also result in cost escalations on construction projects.
“This is likely to be significant, particularly for big projects where you were trying to hold tight margins for projects that are going to be planned,” he said.
Proposed remedies
Antoine testified at a hearing organised by the USTR on Monday. The hearing was part of the process by which the USTR arrives at a determination of the proposed actions it will take. The hearing followed the investigation by the USTR of China targetting the global maritime, logistics and ship building sectors for dominance. The investigation followed a complaint by five trade unions to the USTR in March 2024.
In his testimony, Antoine suggested two possible options for consideration by the USTR.
• Option one – In the interest of sustaining the shipping and logistics requirements of US-Caricom trade, the Caricom private sector, requests the USTR to seek alternatives to the measures proposed in response to the Section 301 investigation, until such time as the shipbuilding and associated industries in the US are developed to fill the gap that will emerge from the proposedremedies.
• Option two – Should the USTR decide to proceed with the application of the proposed remedies, the CPSO, on behalf of the regional private sector requests, that considerations be given to exploring an exemption for Caricom/Caribbean States (as a ‘second-best’ option). Such an exemption (preferably legislated) could be based on:
• Maintaining and expanding Caricom-US trade and commerce – the US has maintained a trade surplus with CARICOM/Caribbean for more than three decades;
• Grandfathering’ of existing vessels – ensuring that smaller vessels currently operating between the US and the small states of the Caribbean (many of which are China-built), critical to supporting the ‘short-sea’ shipping requirements of US-Caricom trade, are not subject to new penalties;
• Exemption for our relatively small Caribbean transshipment hubs- recognizing the strategic role of our small Caribbean ports in global supply chains and ensuring that US-Caribbean trade remains uninterrupted;
• Flexible policy implementation – allowing regional (Caribbean) operators time to adjust and explore alternative vessel sourcing options rather than enforcing sudden financial penalties;
• Stronger US-Caribbean maritime partnerships – encouraging collaborative solutions rather than restrictive policies that could weaken regional trade stability.
• Mutual benefits of exemption to US and Caricom businesses as contemplated under the Caribbean Basin Economic Recovery Act (CBERA) and Caribbean Basin Trade Preferences Act (CBPTA).
