Fears of higher shipping rates remain in U.S.

American agriculture officials are still trying to sort out the ramifications of new shipping fees, but the consensus is that they’re bad for business.

The U.S. Trade Representative (USTR) recently announced the “targeted actions” it is taking in response to its Section 301 investigation into China’s dominance of the global shipbuilding sector.

The investigation was launched in April 2024 at the behest of five national labour unions.

The USTR found that China’s dominance was unreasonable and is now imposing remedies.

The Agriculture Transportation Coalition (AgTC), which represents all U.S. agriculture and forest product shippers, exporters and importers, is not pleased with the USTR’s response.

It said the USTR is attempting to resuscitate the U.S. shipbuilding industry on the backs of farmers already struggling with tariffs, retaliatory tariffs and steadily increasing foreign competition.

Some American farm groups say the final rule is much more palatable than the USTR’s initial proposal, but AgTC thinks it is still a disaster.

“The revised version of the 301 Rule exempts much bulk agriculture exports, but not containerized ag exports/imports, even though USDA itself notes the essential role of container transport of agriculture,” the group said in a press release.

Approximately 25 per cent of U.S. agricultural exports by volume are shipped by container, accounting for 55 per cent of total export value.

“This reflects the higher value of containerized goods, which often include processed or perishable items,” stated the AgTC.

U.S. agricultural containerized goods include meat, poultry, dairy, cotton, fruits, vegetables and specialty grains. Even 10 per cent of U.S. soybean exports move by container.

Canadian agricultural exporters are salivating at the prospect of one of their main competitors facing higher transportation fees.

“It’s a very thin margin business, so anything that adds cost to a competitor stands to put Canada in a better position competitively,” Wade Sobkowich, executive director of the Western Grain Elevator Association, recently told the Western Producer.

AgTC executive director Peter Friedmann agreed that the new fees will “absolutely” make U.S. agricultural products less competitive in overseas markets.

“In many cases it will eliminate them entirely from the foreign markets,” he said.

“If you’re (priced) above the market, nobody buys from you, so you get knocked out entirely. That’s what these fees can do.”

Under the new rules, ships owned and operated by Chinese companies will be charged US$50 per ton starting Oct. 17, 2025, increasing to $140 by 2028.

Chinese-built ships that are not owned and operated by Chinese companies will pay a reduced fee starting at $18 per ton and rising to $33 over the same time frame.

The fees will be charged per voyage, regardless of how many U.S. ports are called on that voyage. They will be charged up to five times per year, per vessel.

There are about eight exemptions, but the one that is most pertinent to the agriculture sector is that there will be no fees charged on vessels arriving empty that are loading U.S. exports.

Friedmann said that exempts most dry bulk vessels, but containers almost always arrive loaded with consumer goods, so they will be subject to the fees.

Jay O’Neil, a consultant with HJ O’Neil Commercial Consulting who traded grain for 32 years, has a different interpretation of the new USTR rules.

He believes Chinese-owned ships are not eligible for any exemptions. That means that about one-quarter of the world’s dry bulk ships would be subject to the new fees no matter what.

“If your ship comes in empty, full or flying a Trump flag, it still gets charged service fees,” he said.

“Losing economic access to up to 25 per cent of the global dry bulk fleet, I think, is pretty significant.”

It wouldn’t halt U.S. exports, but it would make them more expensive.

“That is going to make U.S. ag less competitive, plain and simple,” said O’Neil.

He is not nearly as concerned about the container ship fees, because those fees will likely be shouldered mainly by the inbound cargo.

Outbound containers often go back to Asia empty or filled with low-value cargo such as crops. He thinks ship owners will be reluctant to increase fees for those exporters because it is a narrow-margin business.

Shippers of bulk agricultural commodities such as corn and wheat believe the USTR’s revised actions are far more preferable than the original proposal of assessing a $1 to $1.5 million fee per port call for Chinese-built or Chinese-operated vessels.

The National Corn Growers Association (NCGA) called it a “step in the right direction.”

“Our concern all along has been that any fees placed on Chinese vessels could be passed on to American farmers who rely on those ships to export corn,” NCGA president Kenneth Hartman said in a press release.

“While we are still working to understand how this new version will impact the corn industry, we believe this final action is more workable than the initial proposal.”

NCGA estimated that the original proposal could have cost corn growers as much as $0.64 per bushel, or 14 per cent over the corn price on April 18.

“The added cost had the potential to reduce U.S. corn exports and impede market access,” the commodity group stated in its press release.

U.S. Wheat Associates and the National Association of Wheat Growers were also relieved.

“We appreciate USTR’s understanding of the impact the original proposals could have had on wheat growers and the grain trade,” the groups said in a joint press release.

About half of the U.S. wheat crop is exported every year.

“The reconsideration of the proposal, which would have significantly increased export costs for U.S. wheat, is a welcome relief for our industry,” said the groups.

Friedmann said the AgTC is continuing to work with relevant federal agencies to improve the USTR’s rule and eliminate the damage it will do to the agriculture sector.

“We’re getting members of Congress involved from the farm states. There’s a lot of interest in pushing back hard,” he said.

“I’m not saying that we can eliminate this entirely, but I am sure that we absolutely have to reduce these fees.”

Tags: Poultry, Dairy, U.S., vessels, vegetables, cotton, China, fruits, exports, fees, soybeans, USTR, Grains, tariffs, Meat